What is Duopoly?

A duopoly is a business plan in which two contending undertakings share a similar market. When two brands collaborate to set prices or quantities in this market, customers may spend more. Like any other market structure, a duopoly has a significant impact on how businesses interact with one another.

Duopoly trends are good for the companies because they then are the only companies dominating the market. They can change market dynamics with their products and also change commodity prices according to their convenience. The decisions and actions of one of the market’s two participants will have an effect on the production and activity of the other one because there are only two players. In addition, they affect a company’s operations, product manufacturing, and marketing as well. Inshort, in duopoly market – 

1. Producers rely heavily strategically. The strategic actions and decisions made by one company have a significant impact on its rival.

2. There is a high probability of collusion. They are likely to collaborate in order to achieve significant market gains because of their close connection.

3. There might be a lot of competition. This happens when the two don’t cooperate. Most of the time, regulators keep a close eye on this market to make sure it doesn’t have anti-competitive practices. The two are unable to work together as a result of regulators’ stringent oversight.

4. The influence of duopoly power is significant. The two businesses may employ a differentiation strategy in addition to controlling market supply. Each product will have a large number of loyal customers as long as it uses a differentiation strategy, giving it enormous monopolistic power.

Duopolies are extremely normal in today’s world as there are numerous duopoly sectors in different areas.

If we look at the payment card industry, Visa and Mastercard are the notable duopolies, as are Coca-Cola and Pepsi in the soft drinks, Mac and Windows in laptop operating systems, and so on.

Similarly, India has continued to exhibit the same trends, particularly in tech-driven sectors.

Duopoly market in India

• OLA VS UBER – Taxi services

In India, only Ola and Uber provide tech-based taxi service. In the past, there were a number of private taxi companies. But not many local players had to go out of business or were bought by these companies. Since both companies had a lot of money, many other players had to shut down or sell their taxi businesses to them.

• SWIGGY VS ZOMATO – Food delivery

If you are to order online food in India, only these two companies deliver. It is not that other businesses do not exist, in fact, there were a lot of other businesses in this industry, but most of them were either bought out or merged with one of the companies. Customers now have few options because there are only two food delivery companies.

• BYJU’S VS UNACADEMY – Edtech

As a result of the Covid-19 lockdown, students were unable to attend in-person classes, which led to a boom in the Edtech industry. All that in schooling needed to be moved quickly towards innovation. There was no other choice for the students who had never taken an online class or lecture. Some Edtech organizations saw this open door and jumped onboard. Now Byju’s and Unacademy are the dominant ones in this sector, buying all the other companies under them.

• JIO VS AIRTEL – Telecom

As both Jio and Airtel are developing and additionally they are en route to sending off 5G innovation in India. Because of these organizations having their duopoly, they are controlling the costs. The telecom operators increased their prices by between 20 and 25 percent in November 2021.

Because of these duopolies, clients presently have restricted options and need to follow through on additional costs for their administrations.

• DMART VS RELIANCE RETAIL – Supermarkets

As customers make big-ticket purchases, supermarkets have a low profit margin and a high volume of business.

In the past, independent small stores operated mid-size stores in urban and even rural areas. However, now that they have access to more capital, giants like Dmart and Reliance Retail are decimating these proprietors of small businesses. They offer the lowest prices on their products, and as a result, customers buy more items, increasing their ticket size. By 2030, it is said that the retail sector in India will be worth approximately 1.8 trillion dollars.

Since this is one of the fastest-growing markets, these giants are expanding rapidly. Additionally, Reliance Retail attempted to acquire the failing retailer Big bazaar, but the transaction was unsuccessful. Big Bazaar is currently in danger of going bankrupt.

Some other notable top duopoly companies in India are –

• BATA VS RELAXO – Footwears
• AMARA RAJA VS EXIDE – Batteries
• PRESTIGE AND HAWKINS – Kitchen appliances

BEST 5 STOCKS OF DUOPOLY

S/NO	STOCKS NAME	PRICE
1.	Amara raja batteries	573.45
2.	Bata	1405
3.	Prestige	714.55
4.	Exide	181.45
5.	Relaxo	823.50

Types of Duopoly

The two principal kinds of duopoly: the duopoly of Cournot and Bertrand.

According to the Cournot duopoly model, the competition between two businesses in an industry is shaped by the quantity of goods or services produced. The model assumes that the two businesses collaborate to divide the market among themselves. In order to maintain the equilibrium of a half and half split of the market, one company must alter its production levels if the other company does the same.

While, according to the Bertrand duopoly model, the competition between the two businesses is shaped by price, not production quantity. When two options of equal quality are given, the model predicts that consumers will select the product with a lower price. This suggests that the duopoly’s two businesses will compete on price to gain market dominance.

Implications of Duopoly

Each business in a duopoly market is decisively reliant upon the other. It has an effect on the way individual businesses operate, produce goods, advertise products, and set prices. The strategies employed by each organization determine the competition’s outcomes.

 When two businesses compete on price, it can result in higher prices, especially when the products are comparable. The products of each company completely substitute for one another because of the uniformity. Consequently, a lower price is the customer’s top priority when making a purchase. They have no intention to incline toward or be faithful to a specific item over the other.

• Customers switch when one company lowers its prices, reducing a competitor’s market share. To avoid losing market share, rivals will also reduce their prices. There are price wars that start and continue until prices reach the marginal cost, which reduces profit potential.

• Competition based on quantity Duopolies perform better when the basis of competition is volume rather than price. Profits and the market are divided among each company. As in the Cournot model, when it arrives at the ideal, creation and costs settle.
• Each business will also reap substantial profits. While still operating in a monopolistic market, both businesses can charge prices that are higher than the marginal cost and above the perfectly competitive price. To put it another way, they each hold a monopoly.
• In a duopoly market, execution is one more level of contention. Each business differentiates its offerings to encourage customer loyalty. In the market, differentiation leads to a monopolistic situation. The company’s monopolistic power will grow as a result of the devotion of its customers to each product.

Due to a small number of businesses becoming more and more efficient, the trend toward duopolistic behavior in businesses is growing. These businesses have greater access to capital that can assist them in acquiring or putting their rivals out of business.

However, in a developing nation like India, where people have fewer options for purchasing goods and services, healthy competition between businesses will be beneficial for the long run.