Choose two different industries from your home country representing duopoly and monopoly. identify their key characteristics in relation to the factors used to differentiate between market structures....

The Monopoly Market Structure
Under monopoly, the consumer has a simple choice- either to buy the monopolist's
product or do without it. Monopoly is a market structure characterize by:
1) A single seller
2) A unique product
3) Impossible entry into the market
A single seller:
A monopoly means that a single firm is the industry. One firm provides the total
supply of a product in a given market. For example, the cable television company,
electric power company.
Unique product:
A monopolist faces little or no competition because there are no close substitutes
for his product. Therefore, he faces an inelastic demand curve for his product.
Impossible entry into the market:
In case of monopoly, extremely high ba
iers to entry exist which prevent new
firms to enter into the industry.
Following three ba
iers to entry (under monopoly) that makes it extremely
difficult for new firms to enter into an industry:
1) Ownership of a Vital Resource
2) Legal Ba
iers
3) Economies of Scale
Ownership of a Vital Resource:
Sole control of the entire supply of strategic input used in production of output can
prevent a new firm from entering into the market. For example, today, it is very
difficult for a new professional sports league to compete with the National Football
League (NFL) and the national Basketball Association (NBA) because NFL and
NBA teams have contracts with the best players and leases for the best stadiums
and arenas.
Legal Ba
iers:
The most effective ba
iers protecting a firm from potential competitors are the
esult of government franchise, patent and licenses. The patents are allowed to
encourage research and development, innovation in arts. Sometime, the
government permits a single firm to provide a certain product and exclude other
competing firms by law. For example, the U.S. Postal Service has a government
franchise to deliver first-class mail.
Economics of Scale:
As a result of large scale production the long-run average cost of production falls.
This means a monopoly can emerge in time naturally because of the relationship
etween average cost and scale of an operation. As a firm becomes larger, its cost
per unit of output is lower compared to a new competitor In the long run, this
"survival of the fittest" cost advantage forces new firms to leave the industry.
Because new firms cannot hope to produce and sell output equal or close to that of
the monopolist, thereby achieving the monopolist's low costs, they will not enter
the industry. Thus, a monopoly can arise over time and remain dominant in an
industry even though the monopolist does not own an essential resource or obtain
legal ba
iers.
The Duopoly Market Structure
A duopoly is a special case of oligopoly industry which compromises of two firm
producing homogeneous or differentiated products; it is difficult to enter or leave
the industry. The managerial decisions among the firms in a duopoly industry are
interdependent, that is firm considered the strategic behavior of rival firms, under a
duopoly industry market structure actions will be followed by reactions. Duopoly
is a market structure characterize by:
1) Distribution of Sellers
2) Number and Size Distribution of Buyer
3) Product Differentiation
4) Condition of Entry and Exit
Size Distribution of Sellers:
Duopoly refers to the condition in which industry output is dominated by two
firms. It’s an industry where the pricing, output, and other decisions of one firm
affect, and are affected by, the decisions of other firms.
The interdependence of firms in an industry is illustrated as below it shows the
demand curve faced by both firms in the industry, DD, and the demand curve faced
y an individual, dd. The rationale behind the diagram is as follows. If all firms in
the industry decide to lower their price, say P1 to P2, then the quantity demanded
y consumers will increase from Q1 to Q2.
Suppose, however, that one firm in the industry decided to reduce price from P1 to
P2 in the expectation that second firm would not respond in a similar manner. In
this case, the firm could anticipate a substantial increase in its sales, say from Q1 to
Q3. This implies that over this price range, the demand curve facing the individual
firm is more price elastic than the demand curve faced by the entire industry. The
decision of one firm to unilaterally lower its selling price will result in substantially
larger market share, provided this price reduction is not matched by the firm's
ival- a dubious assumption, indeed.

Number and Size Distribution of Buyer:
The number and size distribution of buyers in duopolistic industry is usually
unspecified, but generally is assumed to involve a large number of buyers.
Product Differentiation:
Product sold by firms in a duopoly may be either homogeneous or differentiated. If
the product is homogeneous, the industry is said to be purely duopolistic. For
example, steel industries. Examples of industries producing differentiated products
are the automobile industries.
Condition of Entry and Exit:
For duopolies to persist in the long run there must be conditions that prevent the
entrance of new firms into the industry. There is disagreement among economist
over just what these conditions are.
Brain (1956) has argued that these conditions should be defined as any advantage
that existing firms hold over potential competitors, while Stigler (1968) argues that
these ba
iers to entry compromise any costs that must be paid by potential
competitors that are borne by existing firms in the industry. For example, new car
wa
anties which require the exclusive use of authorized parts and service that can
limit the ability of potential competitors from offering better or...