Economy

Duopoly

The duopoly is a type of competition which takes place within a market which is characterized mainly by the existence of two companies which produce an article, and who control the totality of a specific market, thanks to the joint fixing of the prices of that product.

What is duopoly?

It is a way of competing that occurs within a market and is characterized mainly by the existence of two different companies that produce the same item and control the entire market, setting prices together and using this price as a tool to achieve control over products within the market.

Companies in duopoly use price as the main tool to control the market and defend companies’ positions in duopoly work. In this way, when they set prices together, companies are able to prevent the entry of new competitors who may threaten their market dominance. These companies act as a classic monopoly, trying to maximize all their profits by equating their income to the marginal cost of production. In the Duopoly, since there are only two producers of the same product, a change in the price of one of them or the production of one of them will affect the other and the reactions of the latter will in turn influence the former.

Characteristics of duopoly

Duopoly models

There are two types of models when we refer to the duopoly. These are the following:

Advantages of duopoly

Disadvantages of duopoly

Examples

Among the best-known examples of duopoly we can mention are Visa and MasterCard credit cards. These two cards handle the largest proportion of the electronic card market. Another clear example is Coca Cola and Pepsi, which are the largest industries with duopolies in the soft drink market. In Mexico, for example, we can mention Televisa and Tv Azteca, these two television networks are the leading companies in this country.

Written by Gabriela Briceño V.
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