A duopoly is a situation in which two companies together own all or almost the entire market for a given product or service. A duopoly is the most fundamental form of oligopoly, a market dominated by a small number of companies. A duopoly can have the same effects on the market as a monopoly if the two actors collaborate through price or production. Cartels cause consumers to pay higher prices than in a truly competitive market, and they are illegal under U.S. anti-dominant law. An oligopoly exists when a few companies control the vast majority of the market sector. While a duopoly is considered an oligopoly, not all oligopolies are duopolyes. For example, the automotive industry is an oligopoly because there are a limited number of manufacturers, but more than two that have to meet global demand. Agreements involve an agreement between competing companies with the aim of manipulating the market, often through price inflation. As described in this Washington Post article, Apple was accused in 2012 of collaborating with publishers to artificially inflate the prices of e-books offered through the iBookstore service.
The charge involved allegations of conspiracy between Apple and five publishers, indicating that pricing has been set, creating an unfair situation in the consumer market. A closely related concept is a monopoly, a situation in which a single company dominates the market. The United States Postal Service (USPS), which by law is the sole provider of first-class postal services, is an example of a monopoly; Usps does not, however, have a monopoly on other shipping services, such as parcels, as these services are not covered by law. Boeing and Airbus are considered a duopoly for their mastery of the large airliner manufacturing market. Similarly, Amazon and Apple dominate the e-book marketplace. While there are other companies that produce airliners and e-books, the market share between the two companies identified in the duopoly is highly concentrated. In a duopoly, two competing companies control most of the market sector for a given product or service they offer. An undertaking may also be part of a duopoly if it provides other services which do not fall within the sector of the relevant market. For example, Amazon is part of the duopoly in the e-book market, but is not connected to a duopoly in its other product areas, such as hardware. A duopoly is a form of oligopoly and should not be confused with a monopoly where there is only one producer and controls the market.
With a duopoly, each company will tend to compete with the other, keep prices lower, and help consumers. However, given that there are only two major players in a sector under the same duopoly, there is a certain probability that a monopoly can be formed, either by agreement between the two companies or if one of them leaves the activity. Visa (V) and Mastercard (MA) are considered duopoly. The two financial companies hold more than 80% of all card transactions in the European Union. This dominance has led the European Central Bank (ECB) to find ways to break the duopoly, as described in an article in “FinExtra.com.” So far, the ECB has tried interbank pay caps, but a new system that would allow instant payments with national payment cards in all European countries could be a game changer.