What is a duopoly?

A duopoly refers to a market structure where two firms dominate the market. This condition creates a unique competitive landscape since the actions of one firm can significantly impact the other. In a duopoly, these two sellers have significant market power and influence, leading to pricing strategies and product offerings that are often interdependent.

The presence of only two dominant firms allows for a distinct kind of competition that can differ from a monopoly, where there's one seller, or from perfect competition, which involves many sellers. Understanding duopoly is vital in economic studies as it shapes market dynamics, pricing strategies, and consumer choices.