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

Arnab Chatterjee, Bikas K. Chakrabarti and S.s Manna

Physica A: Statistical Mechanics and its Applications, 2004, vol. 335, issue 1, 155-163

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.

Keywords: Econophysics; Income distribution; Gibbs and Pareto laws (search for similar items in EconPapers)
Date: 2004
References: View complete reference list from CitEc
Citations: View citations in EconPapers (70)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:335:y:2004:i:1:p:155-163

DOI: 10.1016/j.physa.2003.11.014

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