09-05-2012, 01:33 PM
Duopoly
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Definition
• A duopoly is a firm whose profits depends
on the behavior of one – and only one –
other firm.
Duopolies vs. Oligopolies
• A duopoly is a firm whose profits depends
on the behavior of one – and only one –
other firm.
• An oligopoly is a firm whose profits
depends on the behavior of a few firms.
• All duopolies are oligopolies, but all
oligopolies are not duopolies.
Why Duopolies
• A duopoly is a firm whose profits depends
on the behavior of one – and only one –
other firm.
• An oligopoly is a firm whose profits
depends on the behavior of a few firms.
• All duopolies are oligopolies, but all
oligopolies are not duopolies.
The Cooperative Solution
• Two firms make up an industry.
– How should they set price and output?
• One option is to cooperate, work like a
monopoly and split monopoly profits