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Dynamics of a quantum Cournot-Bertrand duopoly model based on bounded rationality and product substitutability

Yu-Chung Chang

Published Jul 9, 2025• 6 citations

Abstract

The development of quantum information theory based on quantum entangled states is advancing rapidly and has promoted the emergence of quantum game theory. Quantum game theory is quantum information processing applied to classical games, which solves problems that classical games cannot solve. This paper explores the quantum Cournot-Bertrand game model of two firms in a duopoly market with bounded rationality and product substitutability. The first and second firms choose production output and sales price as their decision variables, respectively. We first define the quantum Cournot-Bertrand dynamical system and study the existence and locally stable conditions of equilibrium points. Then we explore bifurcation conditions and bifurcation types. Finally, we do the bifurcation analysis and explore the impacts of the model parameters as the potential market size of products, the two firms' linear marginal cost, the players' speed of strategy adjustment, the product substitution index, and the quantum entanglement degree on the Nash equilibrium stability and bifurcation using numerical analysis and simulation, and provide economic explanations for the results.

DOI: 10.1007/s11128-025-04810-w

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The development of quantum information theory based on quantum entangled states is advancing rapidly and has promoted the emergence of quantum game theory. Quantum game theory is quantum information processing applied to classical games, which solves problems that classical games cannot solve. This paper explores the quantum Cournot-Bertrand game model of two firms in a duopoly market with bounded rationality and product substitutability. The first and second firms choose production output and sales price as their decision variables, respectively. We first define the quantum Cournot-Bertrand dynamical system and study the existence and locally stable conditions of equilibrium points. Then we explore bifurcation conditions and bifurcation types. Finally, we do the bifurcation analysis and explore the impacts of the model parameters as the potential market size of products, the two firms' linear marginal cost, the players' speed of strategy adjustment, the product substitution index, and the quantum entanglement degree on the Nash equilibrium stability and bifurcation using numerical analysis and simulation, and provide economic explanations for the results.

Abstract In the Cournot duopoly market, each firm is not completely rational, one firm's possession of information is not symmetrical, and their Nash equilibria are also usually inferior to Pareto optimality. The intersection of quantum game theory, nonlinear dynamics and asymmetric information may be an effective way to solve this problem. In this paper, we set up a multi-period quantum Cournot duopoly game model with bounded rationality based on asymmetric information, investigate the effects of quantum entanglement and asymmetric information on the local stability of quantum Nash equilibrium and complex dynamic behavior of the system. The result shows that an increase in the quantum entanglement decreases the quantum Nash equilibrium local stability and accelerates the occurrence of the system’s chaotic behavior, while the asymmetric information stabilizes the quantum Nash equilibrium and suppresses the chaotic behavior.The contradictive impact on the local stability of quantum Nash equilibrium creates the interesting properties of the game. Numerical simulations demonstrate these complex dynamical features via bifurcation, strange attractors, fractal dimensions and sensitivity to initial conditions.

On the basis of the bounded rationality and adaptive expectations, we investigate the dynamics of quantum Cournot duopoly game with heterogeneous players by using the Li et al. scheme. Further, we discuss the effect of quantum entanglement on local stability of the system. The results show that: (i) The special form of quantum Cournot duopoly game is the classical Cournot duopoly game, and the quantum Cournot duopoly game with naïve expectation is also a special form of quantum Cournot duopoly game with adaptive expectation. (ii) The increase or decrease of the stable region is dependent on the degree of quantum entanglement. It is related to the difference of relative marginal cost. (iii) The numerical simulation reveals the complexity characteristics of quantum dynamic Cournot game system through the analysis of stability region, bifurcation, strange attractor and sensitivity to initial conditions, and shows the difference from the classical dynamic Cournot model.

Abstract Building on the existing symmetric quantization model of the dynamic Cournot duopoly game (CDG) with asymmetric information, we extend it to an asymmetric quantization model and study the stability of the quantum Bayesian Nash equilibrium (QBNE) under heterogeneous expectations. We analyze the influence of various parameters on the stability of QBNE, with a particular focus on the impact of the parameter α on system stability. The results show that when α < 1, under the same parameters, the quantum strategy of the asymmetric quantization model is more favorable for stabilizing the market. However, when α > 1, the quantum strategy of the symmetric quantization model is more conducive to stabilizing the market.

We present a quantum model of Bertrand duopoly and study the entanglement behavior on the profit functions of the firms. Using the concept of optimal response of each firm to the price of the opponent, we find only one Nash equilibirum point for the maximally entangled initial state. The presence of quantum entanglement in the initial state gives payoffs higher to the firms than the classical payoffs at the Nash equilibrium. As a result, the dilemma-like situation in the classical game is resolved.

This paper demonstrates the quantization of a spatial Cournot duopoly model with product choice, a two stage game focusing on non-cooperation in locations and quantities. With quantization, the players can access a continuous set of strategies, using continuous variable quantum mechanical approach. The presence of quantum entanglement in the initial state identifies a quantity equilibrium for every location pair choice with any transport cost. Also higher profit is obtained by the firms at Nash equilibrium. Adoption of quantum strategies rewards us by the existence of a larger quantum strategic space at equilibrium.