Duopoly

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For other uses, see Duopoly (disambiguation).
Visa and Mastercard are the two largest payment processors in the world. Because their competitors are so small in comparison, Visa and Mastercard may be considered a duopoly.

A true duopoly (from Greek duo δύο (two) + polein πωλεῖν (to sell)) is a specific type of oligopoly where only two producers exist in one market. In reality, this definition is generally used where only two firms have dominant control over a market. In the field of industrial organization, it is the most commonly studied form of oligopoly due to its simplicity.

Duopoly models in economics[edit]

There are two principal duopoly models, Cournot duopoly and Bertrand duopoly:

  • The Cournot model, which shows that two firms assume each other's output and treat this as a fixed amount, and produce in their own firm according to this.
  • The Bertrand model, in which, in a game of two firms, each one of them will assume that the other will not change prices in response to its price cuts. When both firms use this logic, they will reach a Nash equilibrium.

Politics[edit]

Modern American politics, in particular the electoral college system has been described as duopolistic since the Republican and Democratic parties have dominated and framed policy debate as well as the public discourse on matters of national concern for about a century and a half. Third Parties have encountered various blocks in getting onto ballots at different levels of government as well as other electoral obstacles, more so in recent decades.

Examples in business[edit]

The most commonly cited duopoly is that between Visa and Mastercard, who between them control a large proportion of the electronic payment processing market. In 2000 they were the defendants in a US Department of Justice antitrust lawsuit.[1][2] An appeal was upheld in 2004.[3]

Examples where two companies control a large proportion of a market are:

Media[edit]

In Finland, the state-owned broadcasting company Yleisradio and the private broadcaster Mainos-TV had a legal duopoly (in the economists' sense of the word) from the 1950s to 1993. No other broadcasters were allowed. Mainos-TV operated by leasing air time from Yleisradio, broadcasting in reserved blocks between Yleisradio's own programming on its two channels. This was a unique phenomenon in the world. Between 1986 and 1992 there was an independent third channel but it was jointly owned by Yle and MTV; only in 1993 did MTV get its own channel. Safaricom mobile service provider and Airtel in Kenya are perfect examples of Duopoly market in African telecommunication industry.

Broadcasting[edit]

Duopoly is also used in the United States broadcast television and radio industry to refer to a single company owning two outlets in the same city.

This usage is technically incompatible with the normal definition of the word and leads to confusion, inasmuch as there are generally more than two owners of broadcast television stations in markets with broadcast duopolies. In Canada, this definition is therefore more commonly called a "twinstick".

See also[edit]

References[edit]