Pareto Law in a kinetic model of market with random saving propensity

Chatterjee, Arnab ; Chakrabarti, Bikas K. ; Manna, S. S. (2004) Pareto Law in a kinetic model of market with random saving propensity Physica A: Statistical Mechanics and its Applications, 335 (1-2). pp. 155-163. ISSN 0378-4371

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Official URL: http://linkinghub.elsevier.com/retrieve/pii/S03784...

Related URL: http://dx.doi.org/10.1016/j.physa.2003.11.014

Abstract

We have numerically simulated the ideal-gas models of trading markets, where each agent is identified with a gas molecule and each trading as an elastic or money-conserving two-body collision. Unlike in the ideal gas, we introduce (quenched) saving propensity of the agents, distributed widely between the agents (0≤λ>1). The system remarkably self-organizes to a critical Pareto distribution of money P(m)∼m-(ν+1) with ν≃1. We analyze the robustness (universality) of the distribution in the model. We also argue that although the fractional saving ingredient is a bit unnatural one in the context of gas models, our model is the simplest so far, showing self-organized criticality, and combines two century-old distributions: Gibbs (1901) and Pareto (1897) distributions.

Item Type:Article
Source:Copyright of this article belongs to Elsevier Science.
Keywords:Econophysics; Income Distribution; Gibbs and Pareto laws
ID Code:44821
Deposited On:23 Jun 2011 07:55
Last Modified:23 Jun 2011 07:55

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