Q.State the features of duopoly.

Duopoly is a market with only two sellers; its features are strong interdependence, possible product homogeneity or differentiation, entry barriers, an indeterminate demand curve, and the option of collusion or price war.

Meaning. Duopoly is a market structure in which there are only two sellers/producers of a commodity facing many buyers. It is a special (two-firm) case of oligopoly.

Features of duopoly:

1. Two sellers, many buyers — the whole supply of the good is controlled by just two firms.
2. Interdependence — since each firm supplies half the market, the pricing and output decisions of one firm strongly affect the other; each must anticipate the rival's reaction.
3. Nature of the product — the two firms may sell a homogeneous product (pure duopoly) or differentiated products.
4. Barriers to entry — new firms find it difficult to enter, so the market stays limited to two. …