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International Journal of Theoretical Physics

Quantum Approach to Cournot-type Competition

Piotr Frąckiewicz

Published Oct 29, 2017• 33 citations
Publisher

Abstract

The aim of this paper is to investigate Cournot-type competition in the quantum domain with the use of the Li-Du-Massar scheme for continuous-variable quantum games. We derive a formula which, in a simple way, determines a unique Nash equilibrium. The result concerns a large class of Cournot duopoly problems including the competition, where the demand and cost functions are not necessary linear. Further, we show that the Nash equilibrium converges to a Pareto-optimal strategy profile as the quantum correlation increases. In addition to illustrating how the formula works, we provide the readers with two examples.

DOI
10.1007/s10773-017-3567-4

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The aim of this paper is to investigate Cournot-type competition in the quantum domain with the use of the Li-Du-Massar scheme for continuous-variable quantum games. We derive a formula which, in a simple way, determines a unique Nash equilibrium. The result concerns a large class of Cournot duopoly problems including the competition, where the demand and cost functions are not necessary linear. Further, we show that the Nash equilibrium converges to a Pareto-optimal strategy profile as the quantum correlation increases. In addition to illustrating how the formula works, we provide the readers with two examples.
A quantum Cournot game whose classical form game has multiple Nash equilibria is examined. Although the classical equilibria fail to be Pareto optimal, the quantum equilibrium exhibits the following two properties: (i) if the measurement of entanglement between strategic variables chosen by the competing firms is sufficiently large, the multiplicity of equilibria vanishes, and (ii) the more strongly the strategic variables are entangled, the more closely the unique equilibrium approaches to the optimal one.
Playing the Cournot duopoly in the quantum domain can lead to the optimal strategy profile in the case of maximally correlated actions of the players. However, that result can be obtained if the fact that the players play the quantum game is common knowledge among the players. Our purpose is to determine reasonable game outcomes when players’ perceptions about what game is actually played are limited. To this end, we consider a collection consisting of the classical and quantum games that specifies how each player views the game and how each player views the other players’ perceptions of the game. We show that a slight change in how the players perceive the game may considerably affect the result of the game and, in the case of maximally correlated strategies, may vary from the inefficient Nash equilibrium outcome in the classical Cournot duopoly to the Pareto optimal outcome. We complete our work by investigating in the same way the Bertrand duopoly model.
The aim of this paper is to discuss in some detail the two different quantum schemes for duopoly problems. We investigate under what conditions one of the schemes is more reasonable than the other one. Using the Cournot’s duopoly example, we show that the current quantum schemes require a slight refinement so that they output the classical game in a particular case. Then, we show how the amendment changes the way of studying the quantum games with respect to Nash equilibria. Finally, we define another scheme for the Cournot’s duopoly in terms of quantum computation.
A simulation scheme of quantum version of Cournot's duopoly is proposed, in which there is a new Nash equilibrium that may also be Pareto optimal without any entanglement involved. The unique property of this simulation scheme is decoherence-free against the symmetric photon loss. Furthermore, we analyze the effects of the asymmetric information on this simulation scheme and investigate the case of asymmetric game caused by asymmetric photon loss. A second-order phase transition-like behavior of the average profits of firms 1 and 2 in a Nash equilibrium can be observed with the change of the degree of asymmetry of the information or the degree of ‘virtual cooperation’. It is also found that asymmetric photon loss in this simulation scheme plays a similar role as that with the asymmetric entangled states in the quantum game.