Duopoly is the market situation wherein there are only two producers in the market for a particular product. While fixing the price, the firm takes into consideration of the price charged by the other firm producing similar product.
If there is no difference between the products of the two firms, then fixation of prices of their products will be governed by firms mutual relation. If both the firms enter into some sort of agreement then they can fix high price like Monopolist on the contrary, if they do not arrive at any agreement, then they will compete with one another as under perfect competition and both will get minimum price. If there exists product differentiation in their products, then the firm having a quality product will be able to charge higher price.
Examples of duopoly market - where two companies control a large proportion of a market are:
- Pepsi vs Coca-Cola in soft drink market.
- Intel vs AMD in the Microprocessor market
- Kodak vs Fujifilm in motion picture film stock market.