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Duopoly

Definition

A duopoly refers to a market structure where there are only two dominant firms that control the majority of the market share. These firms have significant influence over pricing and competition within the industry.

Analogy

Imagine a school cafeteria with only two food vendors. They are the only options for students, so they have a lot of power in deciding what prices to charge and what kind of food to offer. They can compete with each other, but ultimately they control the choices available to students.

Related terms

Oligopoly: An oligopoly is similar to a duopoly, but instead of just two firms, it involves a small number of dominant firms in an industry.

Monopoly: In contrast to a duopoly, a monopoly occurs when there is only one firm that controls the entire market without any competition.

Perfect Competition: Perfect competition is at the opposite end of the spectrum from a duopoly. It describes a market structure with many small firms that have no significant control over prices or competition.