A duopoly is a market structure in which there are only two dominant firms or players that substantially control the entire market for a particular product or service. In a duopoly, the actions and decisions of one firm directly affect the other, creating a competitive dynamic that is distinct from more competitive markets.

Key features of a duopoly include:

1. **Limited Number of Firms:** A duopoly consists of only two major firms that dominate the market. These firms may be competitors or collaborators, and their actions have a significant impact on market outcomes.

2. **Market Power:** The duopolistic firms have substantial market power, giving them the ability to influence prices, output levels, and overall market conditions. Their decisions can have a substantial impact on consumer choices and market dynamics.

3. **Interdependence:** One of the defining characteristics of a duopoly is the interdependence between the two firms. Each firm’s decisions regarding pricing, production, marketing, or other strategic moves directly influence the other firm’s performance.

4. **Strategic Behavior:** Due to their interdependence, firms in a duopoly engage in strategic behavior. This can involve anticipating and responding to the actions of the competitor, leading to a complex and strategic decision-making environment.

5. **Product Differentiation:** Firms in a duopoly may differentiate their products or services to gain a competitive advantage. Product differentiation can take various forms, such as branding, quality, features, or pricing strategies.

6. **Collusion or Competition:** In some cases, duopolistic firms may engage in collusion, where they cooperate to maximize joint profits. Alternatively, they may compete aggressively to gain a larger market share at the expense of the other firm.

7. **Barriers to Entry:** Duopolies often have high barriers to entry, making it difficult for new firms to enter the market and compete with the established players. Barriers can include high startup costs, economies of scale, brand loyalty, or proprietary technologies.

8. **Regulatory Scrutiny:** Due to the potential for reduced competition and market power abuse, duopolies may attract regulatory scrutiny. Antitrust authorities may monitor the actions of the firms to ensure fair competition and prevent anti-competitive practices.

Examples of industries with duopolies include certain telecommunications markets, aircraft manufacturing, and credit card networks. In telecommunications, for example, there are markets where only two major companies provide services, and their actions have a significant impact on pricing and service quality.

Duopolies are distinct from monopolies (single dominant firm) and oligopolies (a few dominant firms) in terms of the number of major players in the market. The strategic interactions between the two firms in a duopoly make it a unique and interesting market structure from both economic and business strategy perspectives.