A duopoly is a scenario in which two companies dominate the market for a product or service.
Those two companies may be strictly competitors. However, in some cases, they engage in unethical and possibly illegal collaborative strategies to control the market and discourage greater competition. The potential for collusion exists where there are just a few large companies dominating a market.
Essentially, if two companies or any small number of companies conspire to fix prices or engage in other anti-competitive practices, the resulting market distortion effect is similar to that of a monopoly: Higher consumer prices, poorer service and a dampening of innovation.
A few examples of duopolies:
- Visa and Mastercard in credit cards.
- Google and Amazon in ebooks.
- Google and Facebook in digital advertising.
- Microsoft and Macintosh in desktop operating systems.
- Android and iOS in smartphone operating systems.
Duopolies are a type of oligopoly, which refers to any market dominated by a small number of companies.