The Six Characteristics of a Duopoly

Competition and confidentiality: Signaling quality in a duopoly when there is universal private information [An article from: Games and Economic Behavior]The duopoly market structure has the following characteristics.

Characteristics

  1. The number of sellers in this market structure is only two.
  2. The decision of the sellers is not independent of each other.
  3. The change in price and output by one seller affects the other seller who reacts to the change.
  4. The product can be homogenous or differentiated.
  5. The decision variables include price, product differentiation, selling expenses, etc. but the decisions depend upon the strategies of the competitor.
  6. Product differentiation is the entry barrier and also the firm dominating the market can pose as an entry barrier.

The price is determined in the market by demand and supply forces. The competition is between the two firms operating in the market. They respond to each others strategies.