Quantum Economic Advantage

28 Pages Posted: 7 Feb 2022 Last revised: 16 Apr 2023

See all articles by Francesco Bova

Francesco Bova

University of Toronto - Rotman School of Management

Avi Goldfarb

University of Toronto - Rotman School of Management

Roger Melko

University of Waterloo

Date Written: February 2022

Abstract

A quantum computer exhibits a 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 solving such a calculation if its only competitor was a company with a classical computer. Conversely, economic outcomes are unclear in settings where quantum computers do not exhibit a quantum advantage. We model a 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 can not only be more profitable but also invest more in market creation. The results suggest that quantum computers may not need to display a quantum advantage to be able to generate a quantum economic advantage for the companies that develop them.

Suggested Citation

Bova, Francesco and Goldfarb, Avi and Melko, Roger, Quantum Economic Advantage (February 2022). NBER Working Paper No. w29724, Available at SSRN: https://ssrn.com/abstract=4028340

Francesco Bova (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-3985 (Phone)

Avi Goldfarb

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-8604 (Phone)
416-978-5433 (Fax)

Roger Melko

University of Waterloo ( email )

Waterloo, Ontario N2L 3G1
Canada

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