Duopoly
Introduction
A duopoly is a form of oligopoly. Situation in which two companies own nearly all/all of the market for a given product/service.
It is a specific type of oligopoly where only 2 producers existing one market.in reality, this definition is generally used where only 2 firms have dominant control over a market.
In the field of industrial & organization, it is the most commonly studied form of oligopoly due to its simplicity.
Example 1: In market Pepsi & Coca-Cola rule in soft drinks, so they come under Duopoly. Though other soft drinks companies are also there but these two companies cover large share in soft drinks market.
Example 2: P&G & Uniliver, they have all the products.
Duopolies are most effective when the demand
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However, classical and modern economists have developed a variety of models based on different behaviour assumptions.
1. The Cournot’s Duopoly Model
2. The Chamberlin Duopoly Model
3. The Bertrand’s Duopoly Model
4. The Edgeworth Duopoly Model
1. Cournot’s Duopoly Model:
Augustin Cournot, a French economist, was the first to develop a formal duopoly model in 1838.
To illustrate his model, Cournot assumed:
(a) Two firms, each owing an artesian mineral water well;
(b) Both operate their wells at zero marginal cost;
(c) Both face a demand curve with constant negative slope;
(d) Each seller acts on the assumption that his competitor will not react to his decision to change his and price. This is Cournot’s behavioural assumption.
On the basis of this model, Cournot has concluded that each seller ultimately supplies one-third of the market and charges the same price. While one-third of the market remains
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A has his demand curve DDB and as DDB Let us also assume that seller A has a maximum capacity of output OM and B has a maximum output capacity of OM’. The ordinate ODA measures the price.
To explain Edgeworth’s model, let us assume, to begin with, that A is the only seller in the market. Following the profit maximising rule of a monopoly seller, he sells OQ and charges a price, OP2. His monopoly profit under zero cost, equals OP2EQ Now, let B enter the market. B assumes that A will not change his price since he is making maximum profit. He sets his price slightly below A’s price (OP2) and is able to sell his total output. At this price, he captures a substantial part of A’s market.
Seller A, on the other hand , that his sales have gone down. In order to regain his market, A sets his price slightly below B’s price. This leads to price-war between the sellers.
The price- war takes the form of price-cutting which continues until price reaches OP1 At this price both A and B are able to sell their entire output- A sells OQ and B sells OQ The price OP1 could therefore be expected to be stable. But, according to Edgeworth, price OP1 should not be
Monopoly is not just a board game people play for fun, monopolies became powerful and affected the late 1800’s and early 1900’s. Monopolies are the exclusive possession or control of the supply or trade in a commodity or service. Basically, monopolies are firms that have a lot of market power. They greatly controlled industries and played a role in the government, such as helping president President Benjamin Harrison. Monopolies dominated their own industries and were huge for the industrial period in the United States.
Fixing prices is expressly forbidden as it prevents effective competition which
Monopolies would coordinate with other businesses to set prices and to set policies. One example is the railroad monopoly. Cornelius Vanderbilt controlled several railroad companies and soared into wealth. With a monopoly over the railroads, he was able to cut out the middle man by reducing the power of the individual managers. John D. Rockefeller also controlled a monopoly only his was in oil.
Web. 17 Nov. 2015. Some of these companies were monopolies. Monopolies were the business that tried to all control over their product so then they could price it at any price they wanted.
This also causes involving price-fixing and market-division arrangements. It usually involves the private parties and the government which would also be the Department of Justice or the Federal Trade Commission. This is a firm has done something anti-competitive in order to stay ahead in the game or stay ahead in the monopoly. Monopolies without any anti-competitive behavior aren’t usually illegal. An example of these cases was in 1911 and the Supreme Court ruled abuse on John Rocketfeller's Standard Oil Co. because they had abused its monopoly power to keep other companies from going against it and it also divided into thirty-four separate companies.
Market Structure - Oligopoly Oligopoly is a market structure whereby a few number of firms owns a lion’s share in the market. This market structure is similar to monopoly, except that instead of one firm, two or more firms have control in the market. In an oligopoly, there are no upper limits to the number of firms, but the number must be nadir enough that the operations of one firm remarkably influence and affects the others (Investopedia, 2003). The Walt Disney Company is categorized under an oligopoly market structure.
Classical economics emphasises the fact free markets lead to an efficient outcome and are self-regulating. In macroeconomics, classical economics assumes the long run aggregate supply curve is inelastic; therefore any deviation from full employment will only be temporary. The Classical model stresses the importance of limiting government intervention and striving to keep markets free of potential barriers to their efficient operation. Keynesians argue that the economy can be below full capacity for a considerable time due to imperfect markets. Keynesians place a greater role for expansionary fiscal policy (government intervention) to overcome recession.
Without competition, companies would not have the need to adjust their prices, or improve their products to win over customers, resulting in low quality goods & services with high prices. Competition generally has a positive impact on the consumers, as when companies begin to strive to be the best and most successful in their industry, they utilise marketing strategies to win over customers, these include but are not limited to price, product, promotion and place. Two companies which are continually constructing innovative ideas to come out on top are PepsiCo and Coca-Cola. These two companies hold the majority of the market power in the non-alcoholic beverage industry. They are classified as an oligopoly concentration as the two firms control the vast majority of the market share and therefore requires the two companies to compete on prices as well as non-price related aspects.
The type of market my paper is concentrating on is known as a monopolistic competition market. The first characteristic that differentiate a monopolistic competition market from the other 3 markets is that in a monopolistic competition, there are many sellers which would lead to competition between the firms to sell their products. The second characteristic is that monopolistic firms are relatively small, which can result in either new firms to enter the industry or firms that are existing to exit the market. The third characteristic is that the firms in the monopolistic market sell products that are similar but are slightly different compared to other firms in the same market. The last characteristic is that the firms in a monopolistic market
When determining the type of market in which certain goods are sold, there are couple main points to think about: are there many competitors, are the goods homogeneous or heterogeneous and is there free entry and exit in the long run? In our case, there are a lot of sellers in the market, more than 200. Goods, even though can seem to be similar, are heterogeneous. Hotels can differ by location, room quality, size, skill of employees, entertainment, outdoor activities and so on. Also, there is free entry and exit to and out of the market.
When there is a large number of sellers and a large number of buyers in a market, that market is regarded as a perfectly competitive market or industry. In a perfectly competitive market, a single firm cannot dictate the pace and the selling price (Khan Academy, n.d.). In other words, one firm cannot set the prices and the competitors are obligated to market prices. What is fascinating about a perfectly competitive industry is that the barriers that prevent new firms from entering the industry are flexible; that means there are minor barriers of entry as well as little or no barriers to exit the industry (Rittenberg & Tregarthen, 2009). Additionally, buyers and sellers have all the necessary information to make a decision to buy or sell a product.
The oligopoly market is set up in a way so that competitors can survive because each is unique and there are so few competitors that they are virtually indispensable even if some ethics atrocity
First, two firms control the vast majority of the market share, which include Coca-Cola and Pepsi. There are smaller firms in the market, but their market share in the industry is miniscule by comparison to these two dominant firms. Small companies generally lack the financial capital to launch brand on a large scale. Next, the barriers to entry in the industry are very high. Producing soft drinks for a wide market would require a significant investment in production equipment, brand material, and advertising.
Hence we assume this to be a situation of duopoly. The 2 companies sell products which are very close substitutes and are constantly fighting for greater market share. A person may buy a Coke product instead of a Pepsi one, and vice versa. The objective of both is to maximize their profit.
1.0 INTRODUCTION In an economy, there exists different market structures to accommodate different industries and firms. This study will be made to understand in further depth the market power of different market structures, and in particular an example of using case studies of agricultural sector of the French markets to explain how an ideal perfectly competitive market works. This will then be further strengthened with several references linked to the case study. 1.1 Monopoly market