Working Paper: NBER ID: w29724
Authors: Francesco Bova; Avi Goldfarb; Roger G. Melko
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.
Keywords: Quantum Computing; Economic Value; Market Competition; Duopoly; Cost Structure
JEL Codes: L63; M15; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| quantum computing company (C69) | profitability (L21) |
| classical computing company (L63) | profitability (L21) |
| quantum computing company (with cost advantages) (C69) | market creation investment (D40) |
| quantum computing company (due to variable cost advantages) (D26) | monopolist behavior (L12) |
| quantum computing company (without quantum advantage) (C69) | economic advantage (D61) |