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It is too difficult to have definite solution to explain how price and production are fixed under this market. Various Economists like Bertrand, Cournot, etc. have given pricing models for duopoly under different assumptions.

Under it each seller has to go on anticipating the move of the other and fix his price and output policy accordingly. Hence the situation is not steady. It keeps on changing in the light of moves and counter moves of the two players. However some possible solutions can be stated.

First, if the two producers / sellers are equally efficient, have identical cost curves and are also manufacturing nearly identical goods, then they will enter into some kind of written or tacit collusion. They will share market and profit by agreeing to charge certain price.

Secondly, if one of the two producers/ sellers is more efficient with lower cost of production, he will keep very low price. So the other rival cannot afford to sell at that low price. The rival has thus to quit and duopoly will end up in a monopoly with a power to control price.

Thirdly, if the two firms manufacture sharply differentiated goods, they will battle with one another leading to a price war. This may end up in competitive price and normal profit or driving away the relatively weak player out so as to become virtual monopolist. If both the rivals survive due to product differentiation, the price is likely to be between the competitive price at one end and the monopoly price at the other end.

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