New Delhi, Dec. 31 -- Duopoly refers to a scenario in which a market is dominated by two suppliers. While this is better than a monopoly, lack of competition hinders efficiency gains in both such cases. In India, markets with just two suppliers in operation are becoming more common, with implications for consumers.

The recent IndiGo fiasco is an example. As one player in the market fails to cater to demand, the other player faces excess demand, leading to price hikes and unsatiated demand. This leads to erosion of consumer welfare and delivers super-normal profits to the rival.

These social costs and inefficiencies impose economy-wide losses. The recent episode in the airline industry needs to be taken as a warning signal for other sect...