duopoly

noun

du·op·o·ly | \ du̇-ˈä-pə-lē

also dyu̇-\

plural duopolies

Definition of duopoly

1 : an oligopoly limited to two sellers

2 : preponderant influence or control by two political powers

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Boeing and European rival Airbus form a duopoly that dominates commercial airplane sales. — Bernard Condon, The Seattle Times, "Financial pressure mounts to fix Boeing’s troubled jetliner," 1 Apr. 2019 This was the duopoly’s first real competition since Boeing merged with McDonnell Douglas in 1997. — Jon Sindreu, WSJ, "How China Could Challenge the Boeing-Airbus Duopoly," 6 Jan. 2019 For marketers great and small, the algorithms that power social media represent the ever-rising cost of doing business on the platforms owned by the duopoly of Google and Facebook. — Christopher Mims, WSJ, "The Hot New Channel for Reaching Real People: Email," 19 Jan. 2019 The business group has argued that ISS and Glass Lewis form a duopoly that enjoys sweeping influence over corporate-governance matters through their recommendations, which many mutual-fund managers follow. — Dave Michaels, WSJ, "Public Companies Score a Win in Fight to Limit Reach of Proxy Advisers," 13 Sep. 2018 One example from history: In 1998 Coca-Cola was the exemplar of the Buffett approach, the highly profitable leader of a global duopoly in sugary water. — James Mackintosh, WSJ, "The Fed Worries About Corporate Monopolies. Investors Should Just Buy Them.," 23 Aug. 2018 In Spain, Barcelona remains unbeaten as its duopoly with Real Madrid goes on. — Jonathan Wilson, SI.com, "With League Achievements and Titles Devalued, What is the Future of European Football?," 19 Apr. 2018 That's great news for Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary Google and Facebook (NASDAQ: FB), which hold a near-duopoly in Internet ads. — Leo Sun, USA TODAY, "Spending on Mobile ads will overtake TV ads this year: A Foolish Take," 19 May 2018 The risk for Mr Sánchez is that his government is seen as a last gasp of the old political duopoly, discredited during the economic crisis as well as by corruption (which has spattered the Socialists, too). — The Economist, "Spain’s new prime minister, Pedro Sánchez, assembles a reassuring team," 7 June 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'duopoly.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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23 May 2019

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The first known use of duopoly was in 1920

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More Definitions for duopoly

duopoly

noun

Financial Definition of duopoly

What It Is

A duopoly is a form of oligopoly occurring when two companies (or countries) control all or most of the market for a product or service.

How It Works

There are two kinds of duopolies. In the first, the Cournot duopoly, competition between the two companies is based on the quantity of products supplied. The duopoly members essentially agree to split the market. The price each company receives for the product is based on the quantity of items produced, and the two companies react to each other's production changes until an equilibrium is achieved.

In a Bertrand duopoly, the two companies compete on price. Because consumers will purchase the cheaper of two identical products, this leads to a zero-profit price as the two competitors attempt to attract more customers (and thus more profit) through price cuts. The threat of price undercutting means that Bertrand equilibrium prices and profits are generally lower (and quantities higher) than in Cournot duopolies.

Why It Matters

A duopoly forces each producer to carefully consider its rival's potential reactions to certain business decisions. When members of a duopoly compete on price, they tend to drive the product's price down to the cost of production, thereby lowering profits for both members of the duopoly.

These circumstances give duopolists a strong incentive to agree to charge a monopoly price and share the resulting profits. However, federal antitrust laws, most notably the Sherman Act, make collusive activity illegal in the United States. Additionally, each member of a duopoly still has an incentive to compete, even while colluding with the competition. An undetected price adjustment will attract customers who are buying from the competition and customers who are not buying the product at all. Price adjustments may be subtle, including better credit terms, faster delivery, or related free services.

Duopolies are most effective when the demand for the duopoly's product is not greatly affected by price. This is also why duopolies are more effective in the short term; over the long term, prices often become more elastic as consumers find substitutes for the product. Also, demand volatility may lead to disagreements within a collusive duopoly regarding outputs and prices.

Source: Investing Answers