I always plant two seeds in my starter plugs. Quite often, both germinate.
Not wanting to kill any plants, I have transplanted both in to 3 inch pots and waited until they are a couple of months old. When the two plants in a 3 inch pot were completely root-bound, using a very sharp kitchen knife, I carefully sawed the rootball in half between the two stems. I only had one out of a couple dozen not survive the 'surgery'.
Last year, as an experiment, I did not separate several Jalapenos and Cayennes, instead planting out the rootball with both plants intact. It did not seem to affect growth or production very much (I am sure it did somewhat, but all the plants were actually quite productive).