Duopoly facts for kids

A duopoly is when two companies or groups have almost complete control over a market or system. The word "duopoly" comes from two Greek words: duo (meaning "two") and polein (meaning "to sell").

Imagine a market where only two businesses sell a certain product or service. These two businesses are so big that they control most of the sales. This is a type of oligopoly, which is when a few companies control a market. Duopolies are often studied because they are a simpler way to understand how a few big companies can affect a market.

In a duopoly, the decisions one company makes, like changing prices or how much they produce, often affect the other company. They have to think about what their competitor will do.

How Duopolies Work: Economic Models

Economists have created models to understand how duopolies behave. Two famous models are the Cournot model and the Bertrand model.

Cournot Duopoly Model

In the Cournot model, two companies decide how much product to make. Each company assumes that the other company will keep its production level the same. Based on this, they decide how much they will produce to make the most profit.

Bertrand Duopoly Model

The Bertrand model focuses on prices instead of how much is produced. In this model, each company assumes the other company will not change its prices. So, they might try to lower their prices to get more customers. This can lead to a price war until they reach a point where neither company can make more profit by changing its price.

Key Features of a Duopoly

• Only Two Main Sellers: The most important feature is that only two major companies control the market.
• Companies Depend on Each Other: What one company does (like changing prices or advertising) will affect the other company. They have to react to stay competitive.
• Some Monopoly Power: If the products from the two companies are a bit different, each company might have some loyal customers. This gives them a little bit of "monopoly power" over those specific customers.

Duopolies in Politics

Just like in business, a political system can sometimes be dominated by two main groups or political parties. This is often called a Two-party system. In these systems, one party usually holds most of the power in the government at any given time (the Majority party), while the other party has less power (the Minority party).

For example, the United States has a two-party system with the Democratic and Republican parties. Many countries in Latin America also have similar systems. This often happens because of how votes are counted, especially in "winner-take-all" elections where only the person with the most votes wins.

Real-World Business Examples

Many markets around the world are controlled by two main companies. Here are some examples:

• Payment Cards: Visa and MasterCard control a huge part of the electronic payment market.
• Australian Supermarkets: In Australia, Woolworths and Coles sell most of the groceries.
• Soft Drinks: Coca-Cola and Pepsi are the two biggest names in the soft drink industry.
• Fast Food Burgers: McDonald's and Burger King are the top two fast food chains for hamburgers.
• Comic Books: Marvel Comics and DC Comics are the two giants in the comic book world.
• Toys: Mattel and Hasbro are the biggest toy makers.
• Mobile Operating Systems: Apple's iOS and Google's Android run almost all smartphones.

Duopolies in Media and Broadcasting

Sometimes, governments have allowed only two main broadcasters to operate, creating a duopoly in the media.

In Finland, for example, the state-owned company Yleisradio and the private company Mainos-TV were the only broadcasters allowed from the 1950s until 1993. Mainos-TV even had to rent air time from Yleisradio to broadcast its shows!

In the United Kingdom, the BBC and ITV were the main broadcasters for a long time until more channels became available in the 1990s.

In Kenya, Safaricom and Airtel are the two main mobile service providers.

Broadcasting Duopoly (Different Meaning)

In the United States, the word "duopoly" is also used in a slightly different way for TV and radio. It means when one company owns two TV or radio stations in the same city. This is different from the usual meaning of duopoly, where two *different* companies control a market. In Canada, this is often called a "twinstick."

See also

In Spanish: Duopolio para niños