Quantum Economic Advantage

Francesco Bova (), Avi Goldfarb and Roger G. Melko ()
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Francesco Bova: Creative Destruction Laboratory, Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada; Creative Destruction Lab, Perimeter Institute for Theoretical Physics, Waterloo, Ontario N2L 2Y5, Canada
Roger G. Melko: Creative Destruction Lab, Perimeter Institute for Theoretical Physics, Waterloo, Ontario N2L 2Y5, Canada; Department of Physics & Astronomy, University of Waterloo, Waterloo, Ontario N2L 3G1, Canada

Management Science, 2023, vol. 69, issue 2, 1116-1126

Abstract: A quantum computer exhibits quantum advantage when it can perform a calculation that a classical computer is unable to complete. It follows that a company with a quantum computer would be a monopolist in the market for such a calculation if its only competitor was a company with a classical computer. Conversely, economic outcomes are unclear if quantum computers do not exhibit a quantum advantage, but classical and quantum computers have different cost structures. We model a Cournot duopoly where a quantum computing company competes against a classical computing company. The model features an asymmetric variable cost structure between the two companies and the potential for an asymmetric fixed cost structure, where each firm can invest in scaling its hardware to expand its respective market. We find that even if (1) the companies can complete identical calculations, and thus there is no quantum advantage, and (2) it is more expensive to scale the quantum computer, the quantum computing company may be more profitable and also invest more in market creation due to efficiency gains from using quantum algorithms. Finally, we provide examples of settings where the classical computer can also perform a calculation, but not in a cost-effective enough manner to be commercially viable. In such a setting, the quantum computing company becomes a monopolist despite exhibiting no quantum advantage. Taken together, quantum computers may not need to display a quantum advantage to be able to generate a quantum economic advantage for the companies that deploy them.

Keywords: quantum computing; quantum advantage; information technology (search for similar items in EconPapers)
Date: 2023
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http://dx.doi.org/10.1287/mnsc.2022.4578 (application/pdf)

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Working Paper: Quantum Economic Advantage (2022)
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