Question

Identify two specific firms that you believe operate as a duopoly or in a larger oligopoly and answer the following questions.

1. Describe the industry your firms operate in and why you believe they qualify as close to an oligopoly, or more specifically, a duopoly.
2. Is one of the firms a leader or are these two firms largely operating simultaneously?
3. How do repeated interactions factor in to these firms' pricing decisions?
4. Name at least one reason why consumers may suffer from the market power of these firms and one reason why consumers may actually benefit from the competition in which these two firms engage.
5. If applicable, have these two firms ever been accused of collusion and been subject to antitrust scrutiny? If so, what?

Answer 1

One of the best examples of modern day duopoly can be seen in the international mobile operating systems markets. The worldwide operating systems markets is dominated by two operating systems, Android ( owned by Alphabet Inc or Google ) and the Apple iOS ( owned by Apple Inc).

Alphabet Inc and Apple Inc are technology companies who operate in the mobile and laptop sales, advertising and mobile software ( operating system ) area. These both compete primarily in the mobile operating system space. They both cumulatively hold approximately 99.42% of the market share in the mobile operating system market. This is why it can be called as a classic duopoly. Apple's iOS has around 24.99% market share whereas Alphabet's Android has arounf 74.43% market share.

Both the firms operate simulatenously and are both extremely huge in terms of market power. They both target different customer segments. Apple primarily targets the slightly more affluential target segment whereas Android targets the more price sensitive segment. Both the companies play to their strengths and ensure that they make a point of differentiation. Apple prides itself on exclusivity and thus charges high commision rates for applications that are hosted on iOS. Alphabet thrives on the concept of inclusivity and wide reach and thus charges relatively low commision rates for applications hosted on Android. Alphabet is also far more open to customization when compared to iOS. However, iOS is expected to be far more secure and has high standards of privacy when compared to Android.

The firms extremely high market power has led to them exerting a lot of influence over the application developers. There have been situations where applications hosted on Android were removed with very short notice ( For example, Paytm, a unicorn company which was competing withh Google Pay in the payments space in India was abruptly removed for two days by Goolgle ). This can severely limit the competition. There have been similar accusations against Apple by Epic Games. This shows that these companies can use their immense influence in the operating system space to limit competition, thereby causing a loss to the consumers.

The duopoly's has ensured that there is a certain amount of standardization in the market. It has also made the entry extremely easy for application developers by reducing the distribution channels in the market to only two. For example, if an application developer wants to launch a mobile app, he just needs to ensure that his application is present in Android and iOS. This ensures that he has penetrated more than 99% of the market just by being present on two platforms. This would not have been possible if it was a perfect competition and there were multiple operating systems.

These both firms have not been accused of colluding till date. This is partly because mobile operating systems is not the only space in which they operate. It is also because of the different type fo target segments the two operating systems attract. However, there have been a lot of anti trust litigations against these two companies wherein companies have accused them of using their absolute dominance in the operating systems space to limit competition. Multiple government regulatory authorities have also started to take notice of this fact and are pushing for curbs on their powers.