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Duopoly and types of it

Wednesday, 29 March 2023

Duopoly refers to a market structure where there are only two dominant companies or firms that hold a significant share of the market. In a duopoly, these two firms have substantial influence and control over pricing, production, and market dynamics.


There are different types of duopoly, each characterized by the nature of competition and market behavior:

  1. Pure or Perfect Duopoly: In a pure duopoly, two companies operate in a market with identical or highly similar products or services. The firms compete directly with each other and have a significant impact on pricing and market conditions. Examples include Coca-Cola and PepsiCo in the carbonated soft drink market.
  2. Non-Collusive or Competitive Duopoly: In a non-collusive duopoly, the two firms compete vigorously against each other. Each firm independently determines its prices, output levels, and marketing strategies, striving to gain a larger market share. Examples include Boeing and Airbus in the commercial aircraft manufacturing industry.
  3. Collusive or Cooperative Duopoly: In a collusive duopoly, the two dominant firms reach an agreement or engage in cooperative behavior to minimize competition and maximize joint profits. This can involve price-fixing, market-sharing agreements, or coordinated actions. However, such collusive behavior may be illegal in many jurisdictions due to anti-trust regulations.
  4. Tacit Duopoly: In a tacit duopoly, there is an implicit understanding between the two firms to avoid direct competition and maintain a stable market equilibrium. While there may not be any formal agreement, the firms tend to avoid aggressive price wars or actions that disrupt the status quo. This type of duopoly often occurs when the firms have a mutual interest in maintaining stability or have a tacit understanding of their market positions.


It's important to note that duopolies can have different characteristics and behaviors depending on the industry, market conditions, and the specific actions of the firms involved. While duopolies can lead to intense competition and innovation in some cases, they also raise concerns about reduced consumer choice, potential collusion, and barriers to entry for new competitors. Regulatory authorities often monitor duopolistic markets to ensure fair competition and protect consumer interests.



One prominent example of a duopoly in the real world is the rivalry between The Coca-Cola Company and PepsiCo in the carbonated soft drink market. These two companies have long dominated the global beverage industry and have a significant share of the market.


Category: Business

Tags: Marketing

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