Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, February 16, 2010

Quantum Model of Bertrand Duopoly

Posted by D. Daniel Sokol

Salman Khan, M. Ramzan, and M. K. Khan (all Department of Physics Quaid-i-Azam University Pakistan) explain Quantum Model of Bertrand Duopoly.

ABSTRACT: We present the quantum model of Bertrand duopoly and study the entanglement behaviour on the profit functions of the firms. Using the concept of optimal response of each firm to the price of the opponent, we found four Nash equilibria for maximally entangled initial state. We have shown that only one point among the four Nash equilibria has valid physical meaning. The very presence of quantum entanglement in the initial state gives payoffs higher to the firms than the classical payoffs at the physically valid point for higher values of substitution parameter.

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