Duopoly

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A true duopoly is a specific type of oligopoly where only two producers exist in one market. In reality, this definition is generally used where only two 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.

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[edit] Duopoly Models in Economics

There are two principal duopoly models, Cournot duopoly and Bertrand duopoly:

  • 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 Bertrand model, in which, in a game of two firms, each one of them will assume that the other will not change prices in response to its price cuts. When both firms use this logic, they will reach a Nash Equilibrium.

[edit] Politics

Modern American politics has been described as a duopoly since the Republican and Democratic parties have dominated and framed policy debate as well as the public discourse on matters of national concern for about a century and a half. Third Parties have encountered various obstacles to getting onto ballots at different levels of government, more so in recent decades.

See List of political parties in the United States for a more comprehensive look at the politics of the Two-party system, Duverger's law.

[edit] Examples in business

The most commonly cited duopoly is that between Visa and Mastercard, who between them control a large proportion of the electronic payment processing market. In 2000 they were the defendants in a US Department of Justice antitrust lawsuit[1][2]. An appeal was upheld in 2004[3].

Examples where two companies control a large proportion of a market are:

[edit] Broadcasting

Duopoly is also used in the broadcast television and radio industry, referring to a single company owning two outlets in the same city. This usage is technically incompatible with the definition of the word, inasmuch as there are generally more than two owners of broadcast television stations markets with duopolies. In the United States, this has been frowned upon when using public airwaves, as it gives too much influence to one company. In Canada, this definition is more commonly called a "twinstick".

Duopolies were not allowed in the United States until 2001. The Federal Communications Commission allows common ownership of two stations in a single market with two conditions:

  • There must be at least eight unique station owners left in the market once a duopoly is formed. In effect, duopolies are not allowed in any market with fewer than nine full-power stations (counting noncommercial stations).
  • Two of the four highest-rated stations in a market cannot be owned by the same person.

There are at least two cases where a company has been accused of having duopolies where they aren't legally permitted by using shell corporations to control a second station in a market.

See also concentration of media ownership.

[edit] Examples in American television

A special case is Salt Lake City. The NBC affiliate KSL-TV is owned by Bonneville International, and an educational station, KBYU-TV, is owned by Brigham Young University and carries PBS programming. Bonneville is owned by the Deseret Management Corporation, a for-profit arm of The Church of Jesus Christ of Latter-day Saints; BYU is directly owned by the LDS Church. While Deseret and BYU are separate entities, the fact that both are owned by the LDS Church makes them a duopoly in a sense. There are also examples of educational interests owning two stations in the same market, such as WQED/WQEX in Pittsburgh and Milwaukee Public Television's two stations.

Where there are 2 different owners listed, 1 station owner controls another station, called a local marketing agreement. Owner "A" doesn't own station "B", they just operate it for owner "B".

The NBC Universal duopoly in Los Angeles is a special case. Apparently, KWHY & KVEA both count as ½ of a station, going back to an old rule trying to make UHF stations start up, with VHF station counting as 2 UHF stations. Apparently, it allows a "trioply" in Los Angeles.

[edit] See also

Retrieved from "http://en.wikipedia.org/wiki/Duopoly"
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