What is a 'Duopoly'?

A duopoly is a situation where two companies own all or nearly all of the market for a given product or service. A duopoly is the most basic form of oligopoly, a market dominated by a small number of companies. A duopoly can have the same impact on the market as a monopoly if the two players collude on prices or output. Collusion results in consumers paying higher prices than they would in a truly competitive market.

In a duopoly, two competing businesses control the majority of the market sector for a particular product or service they provide. A business can be part of a duopoly even if it provides other services that do not fall into the market sector in question.

Boeing and Airbus have been considered a duopoly for their command of the large passenger airplane manufacturing market. Similarly, Amazon and Apple dominate the e-book marketplace. While there are other companies in the business of producing passenger planes and e-books, the market share is highly concentrated between the two businesses identified in the duopoly.

Collusion involves an agreement between competing entities with the purpose of manipulating the market often by inflating prices. For example, in 2012, Apple was accused of colluding with publishers to artificially inflate the prices of e-books offered through the iBookstore service. The accusation included charges of conspiracy between Apple and five publishers, suggesting that pricing was fixed creating an unfair situation within the consumer market.