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SEVENTH RULE OF COMPLEXITY: The seventh of seven basic rules of the economy. It is the observation that the world is complex, that every action has direct and often intended consequences and indirect and probably unintended effects (that is, cause and effect). A few of the more noted illustrations of this seventh rule are the circular flow (especially the expenditure multiplier) and market failures (especially externalities).
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                           DUOPOLY: An oligopoly market structure containing exactly two firms. As an oligopoly, duopoly exhibits the oligopolistic characteristics and undertakes oligopolistic behavior, such as barriers to entry, interdependent actions, and nonprice competition. While duopoly, in its purest form of EXACTLY two firms in the industry, is seldom found in the real world, it does provide an excellent, easy to use illustration of oligopoly. In fact, most instructional analysis of oligopoly generally assumes a two-firm, duopoly market. Duopoly is a special type of oligopoly market structure that contains only two firms, no more, no less. Duopoly is an ideal model for analyzing oligopoly behavior. With more than one firm, duopoly captures the essence of oligopoly, especially interdependent behavior, while keeping the analysis as simple as possible.The duopoly model is commonly used to analyze collusion, which results when two firms join together to control the market like a monopoly. Duopoly is ideally suited for collusion analysis. It contains the minimum number of firms needed for an oligopoly and provides all of the insight that would be generated from analyzing three or more firms. Another model using the duopoly market structure is game theory, which investigates the interdependent actions of two competing firms. Game theory is conceptually and analytically more difficult if more than two firms are included. The essential conclusion can be easily obtained using duopoly. While the real world seldom contains a pure duopoly market structure, some industries come close. In particular, the duopoly model works well if a market is dominated by two large firms, even though it might contain other smaller ones. One example that comes close to duopoly is the global market for passenger aircraft. This market is dominated by Boeing (from the United States) and Airbus (from Europe). The vast majority of all passenger airlines use planes manufactured by one of these two firms. Another example might be offered by a small town that contains two grocery stores.
Recommended Citation:DUOPOLY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 18, 2025].
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Today, you are likely to spend a great deal of time wandering around the downtown area trying to buy either shoe laces for your snow boots or a rim for your spare tire. Be on the lookout for the happiest person in the room.
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