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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Its duopoly with Airbus means that, in the short run, airlines and suppliers have little choice but to bear the costs stoically. — The Economist, "Boeing’s troubles cost the aerospace industry $4bn a quarter," 22 Aug. 2019 Indian market is clearly a duopoly between Amazon India and Flipkart. — Sangeeta Tanwar, Quartz India, "eBay partners Paytm Mall in fresh attempt to crack Indian e-commerce," 18 July 2019 The absence of new competitors outside the duopoly is a mark of unhealthy competition. — Milwaukee Journal Sentinel, "Ross Perot changed American politics by disrupting Republicans and Democrats alike. We can learn from that.," 11 July 2019 Note that duopoly is different from bilateral monopoly. — Edward Lotterman, Twin Cities, "Real World Economics: Playing monopoly is more than just rolling the dice," 16 June 2019 Large passenger airliner production, in which Boeing and Airbus dominate, is a duopoly. — Edward Lotterman, Twin Cities, "Real World Economics: Playing monopoly is more than just rolling the dice," 16 June 2019 The burgeoning system could potentially pose a challenge to the Visa and Mastercard card-payment duopoly. — John Detrixhe, Quartz, "A Chinese-style payment network to challenge Visa and Mastercard is taking shape in Europe," 10 June 2019 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

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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12 Sep 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