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Concept
Duopoly
Summary
A duopoly (from Greek δύο, duo "two" and πωλεῖν, polein "to sell") is a type of oligopoly where two firms have dominant or exclusive control over a market, and most (if not all) of the competition within that market occurs directly between them.
Duopoly is the most commonly studied form of oligopoly due to its simplicity. Duopolies sell to consumers in a competitive market where the choice of an individual consumer choice cannot affect the firm in a duopoly market, as the defining characteristic of duopolies is that decisions made by each seller are dependent on what the other competitor does. Duopolies can exist in various forms, such as Cournot, Bertrand, or Stackelberg competition. These models demonstrate how firms in a duopoly can compete on output or price, depending on the assumptions made about firm behavior and market conditions.
Cournot Model in Game Theory: In 1838, Antoine A. Cournot published a book titled "Researches Into the Mathematical Principles of the Theory of Wealth" in which he introduced and developed this model for the first time. As an imperfect competition model, Cournot duopoly (also known as Cournot competition), in which two firms with identical cost functions compete with homogenous products in a static context, is also known as Cournot competition.
The Cournot model, shows that two firms assume each other's output and treat this as a fixed amount, and produce in their own firm according to this.
The Cournot duopoly model relies on the following assumptions:
Each firm chooses a quantity to produce independently
All firms make this choice simultaneously
The cost structures of the firms are public information
In this model, two companies, each of which chooses its own quantity of output, compete against each other while facing constant marginal and average costs. The market price is determined by the sum of the output of two companies. is the equation for the market demand function.
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