A Digital Library for Microeconomics Education

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Market Structure: Duopoly Market

Duopoly can also be examined experimentally as a market, with two sellers and several buyers. This page describes a duopoly market that is similar to the duopoly game, except that rather than a constant marginal cost for the sellers, the duopoly market example that we develop has marginal costs that increase. This change is introduced so that it will be easier to compare duopoly to a standard example of a competitive market and also to a standard example of a monopoly market.

Figure 1: Duopoly price and quantity are between monopoly and competition.

Figure 1 shows the monopoly price and quantity and the competitive price and quantity for experiments with the same marginal cost schedules and marginal value schedules that we use in our duopoly market experiment. By using the same marginal cost and marginal value schedules, we can make a direct comparison between these three different market structures.

From the diagram we can see that the competitive price is pc = 24 and the competitive quantity is qc = 20, 21, or 22. The monopoly price and quantity for these marginal cost and value schedules are worked out on the monopoly page. The monopoly price is pM = 32 and the monopoly quantity is qM = 14.

For this duopoly market, there is an argument included on the page with the experiment configuration which shows that the duopoly price and quantity for these margainal cost and value schedules are approximately pD = 28 and qD = 17.

Duopoly Market Experiment Configurations

Experiments on the duopoly market model are included in MarketLink for both the double auction and the posted offer auction. If you haven't yet used MarketLink to run an experiment, go to the MarketLink page for information. If you are familiar with MarketLink, you can add these experiments to you profile from the duopoly market experiment configurations page.

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