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Duopoly is a type of imperfect market in which there are only two sellers producing an identical product in the market. Augustin Cournot, a French economist, was the first economist to develop the model of duopoly. In a duopoly situation, each seller may sell an identical product or a differentiated product. Duopoly may be broadly classified into:What can economic models tell us about the form and structure of our politics? If anything?
1. Duopoly with product differentiation: Here the producers may be producing the same product, but there may be minor differences in packaging, size, colour, shape etc. When there is product differentiation each seller may have his own customers for the product and is not afraid of this rival.
2. Duopoly without product differentiation: When similar products are produced by the competing duopolists it is known as duopoly without product differentiation. In such a situation each seller cannot ignore the price and output of the rival in the market . . .
On the Model of Duopoly
From the English Literature blog:
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4 comments:
The more that money is accepted as a complement if not a substitute for voting, the more relevant economics may become to political science, though it may explain how the two big parties differentiate themselves to raise money better than it'd explain how they win votes.
I was wondering to what extent the economic model of duopoly could be applied to make sense of the two-party system. For instance, is there product differentiation between the Democrats and Republicans or not? The folks who say there is no difference between the two parties are often criticized for oversimplifying, but in many cases it seems like they're not saying there are NO DIFFERENCES between the two but rather that these differences are ultimately inconsequential.
Depends on what we consider the product. If we assume that each party is selling "government" the product differentiation may seem minimal. If they're selling "ideology," the differences are so important that the situation isn't even necessarily a duopoly in the economic sense. The skeptical perception is that ideology is only a method of product differentiation, but consumers may disagree. In any event, economic duopoly doesn't exactly describe the Bipolarchy because a consumer can always choose to buy from both sellers at the same time if he has the means. At the polls, splitting the ticket isn't necessarily the same thing.
I'd say that the perception of the significance of the diffs between the two party is part subjective and part the product of widespread manipulation of voters' preferences.
So they're trying to have their cake and it too. Have some differentiation, but not a lot...
This is why we need a contested duopoly and a host of local third parties who would not rival the major parties but who would raise up new issues and reframe old issues such that there has to be more substantial and more dynamic product differentiation (and homogenization in a process of creative destruction) between the two major parties.
dlw
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