What is a 'Duopoly'?

A duopoly is a situation where two companies own all or nearly all of the market for a given product or service. A duopoly is the most basic form of oligopoly, a market dominated by a small number of companies. A duopoly can have the same impact on the market as a monopoly if the two players collude on prices or output. Collusion results in consumers paying higher prices than they would in a truly competitive market, and it is illegal under U.S. antitrust law.

BREAKING DOWN 'Duopoly'

In a duopoly, two competing businesses control the majority of the market sector for a particular product or service they provide. A business can be part of a duopoly even if it provides other services that do not fall into the market sector in question. For example, Amazon is a part of the duopoly in the e-book market but is not associated with a duopoly in its other product sectors, such as computer hardware.

Examples of Duopolies

Boeing and Airbus have been considered a duopoly for their command of the large passenger airplane manufacturing market. Similarly, Amazon and Apple dominate the e-book marketplace. While there are other companies in the business of producing passenger planes and e-books, the market share is highly concentrated between the two businesses identified in the duopoly.

Collusion

Collusion involves an agreement between competing entities with the purpose of manipulating the market often by inflating prices. For example, in 2012, Apple was accused of colluding with publishers to artificially inflate the prices of e-books offered through the iBookstore service. The accusation included charges of conspiracy between Apple and five publishers, suggesting that pricing was fixed creating an unfair situation within the consumer market.

Oligopoly

An oligopoly exists when a few businesses control the vast majority of a market sector. While a duopoly qualifies as an oligopoly, not all oligopolies are duopolies. For example, the automobile industry is an oligopoly because there are a limited number or producers, but more than two, who must respond to worldwide demand.

Monopolies

A closely related concept is a monopoly, a situation in which a single company dominates the market. The United States Postal Service (USPS), which is by law the sole provider of first-class mail services, is an example of a monopoly; however, USPS does not hold a monopoly over other shipping services, such as parcels, because these services are not covered within the law.

RELATED TERMS
  1. Cournot Competition

    The Cournot competition is an economic model in which competing ...
  2. Market Power

    Market power describes a company's relative ability to manipulate ...
  3. Franchised Monopoly

    A franchised monopoly is a company sheltered from competition ...
  4. Forex e-Book

    A forex e-book is an extensive digital document which provides ...
  5. Duopsony

    A duopsony is an economic condition in which there are only two ...
  6. Buyer's Monopoly

    A buyer's monopoly, or monopsony, is a market situation where ...
Related Articles
  1. Insights

    How and Why Companies Become Monopolies

    Without competition, monopolies can raise prices and lower quality, leaving consumers little choice. But monopolies can benefit consumers as well.
  2. Investing

    Facebook, Google Digital Ad Market Share Drops as Amazon Climbs

    The digital duopoly faces rising competition from fast growing smaller rivals.
  3. Small Business

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  4. Investing

    T-Mobile Wins Big in FCC Spectrum Auction

    Dish Network and Comcast are the other winners in today's spectrum auction.
  5. Taxes

    Why Monopoly Is A Terrible Finance Teacher

    With its plethora of inaccuracies, Monopoly doesn't offer the best lessons in real-world finance.
  6. Investing

    US Post Office Cites Govt., Not Amazon, for Losses

    The US Postal Service blamed its fiscal Q2 losses on an inflexible government policy—not Amazon.
  7. Small Business

    What are antitrust laws?

    Learn about antitrust laws or "competition laws." These statutes protect consumers from predatory business practices by ensuring fair competition exists.
  8. Investing

    T-Mobile's $8 Billion Move to Improve Its Network

    While T-Mobile (NASDAQ: TMUS) offers lower prices than its two biggest rivals, the wireless service provider has always been impaired by consumers' impression that it has an inferior network. ...
  9. Investing

    7 Reasons Why Alphabet Will Dominate

    Alphabet's shares are up 30% in the past year, far outpacing Facebook and the S&P 500.
  10. Investing

    The 3 Best Shipping Services to Use This Holiday Season (UPS, FDX)

    Look at the strengths, weaknesses and comparative costs of the three best shipping companies: the U.S. Postal Service, UPS and FedEx.
RELATED FAQS
  1. What Are the Major Differences Between a Monopoly and an Oligopoly?

    Learn about the major differences between a monopoly and an oligopoly. Find answers to some common questions surrounding ... Read Answer >>
  2. How does a monopoly contribute to market failure?

    Read a simple overview of the theory of market monopoly, where it originated and some contemporary challenges to the classical ... Read Answer >>
  3. What are Common Examples of Monopolistic Markets?

    Providers of water, natural gas, telecommunications, and electricity have all been historically monopolistic markets. A monopoly ... Read Answer >>
  4. Does perfect competition exist in the real world?

    There are significant obstacles preventing perfect competition in today's economy, and many economists think it is better ... Read Answer >>
Trading Center