Degree and wealth distribution in a network induced by wealth

Gyemin Lee and Gwang Il Kim

Physica A: Statistical Mechanics and its Applications, 2007, vol. 383, issue 2, 677-686

Abstract: A network induced by wealth is a social network model in which wealth induces individuals to participate as nodes, and every node in the network produces and accumulates wealth utilizing its links. More specifically, at every time step a new node is added to the network, and a link is created between one of the existing nodes and the new node. Innate wealth-producing ability is randomly assigned to every new node, and the node to be connected to the new node is chosen randomly, with odds proportional to the accumulated wealth of each existing node. Analyzing this network using the mean value and continuous flow approaches, we derive a relation between the conditional expectations of the degree and the accumulated wealth of each node. From this relation, we show that the degree distribution of the network induced by wealth is scale-free. We also show that the wealth distribution has a power-law tail and satisfies the 80/20 rule. We also show that, over the whole range, the cumulative wealth distribution exhibits the same topological characteristics as the wealth distributions of several networks based on the Bouchaud–Mèzard model, even though the mechanism for producing wealth is quite different in our model. Further, we show that the cumulative wealth distribution for the poor and middle class seems likely to follow by a log-normal distribution, while for the richest, the cumulative wealth distribution has a power-law behavior.

Keywords: Wealth distribution; Degree distribution; Network model (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:383:y:2007:i:2:p:677-686

DOI: 10.1016/j.physa.2007.04.060

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