What Is The Advantages And Disadvantages Of Duopoly?

The advantages of a duopoly are:

• Close competition
• Competition in prices as a direct reaction to the other producer
• Interaction
• Simplicity

The disadvantages are:

• In some cases, duopolies will reach a Nash Equilibrium, and prices will not drop.
• Two huge corporations in one market will make it very difficult for smaller firms to gain recognition or a market share. This means many new firms will die out before they are able to generate any new competition.
• The lack of new firms can mean a lack of new products, and a market can go stale.

A duopoly is a business term to describe an industry which has just two producers in one market. It is a similar concept to a monopoly, except a monopoly only has one producer for its one market. Because of its simplicity, the duopoly model is the most studied model of oligopoly. One very clear example of a duopoly is the soft drinks market, which is dominated by Coca-Cola and its rival, Pepsi Co. It should be noted that there can be more than two producers in a duopoly, but the main two will need to have dominant market share.

It is widely believed that any type of oligopoly will not be good for consumers in the market. With only a small number of companies to choose from, many consumers may not be able to find the products they want, and prices may stay relatively high. With that said, the smaller the number of producers in a market, the better for the companies, as there are fewer companies for consumers to decide who to give their money to.