Why Are Duopolies So Competitive?

A duopoly is a situation in which two firms control nearly all of the market for a product or service.
Duopolies can be surprisingly competitive. If you remember that the price of a product or service is determined solely by the highest losing bid price and the lowest losing ask price, you?ll realize why a duopoly can be so competitive. A large number of inefficient competitors will have almost no affect on prices in the long run unless someone (either a government or a group of idiotic investors) is willing to continually finance unprofitable operations in an unprofitable industry (think airlines).
Of course, there is always the fear of a price fixing scheme in a duopoly. Generally, however, that fear is unfounded. Human nature suggests a price fixing scheme View the rest of this article