Modeling wealth distribution in growing markets

Urna Basu () and P. K. Mohanty

The European Physical Journal B: Condensed Matter and Complex Systems, 2008, vol. 65, issue 4, 585-589

Abstract: We introduce an auto-regressive model which captures the growing nature of realistic markets. In our model agents do not trade with other agents, they interact indirectly only through a market. Change of their wealth depends, linearly on how much they invest, and stochastically on how much they gain from the noisy market. The average wealth of the market could be fixed or growing. We show that in a market where investment capacity of agents differ, average wealth of agents generically follow the Pareto-law. In few cases, the individual distribution of wealth of every agentcould also be obtained exactly. We also show that the underlying dynamics of other well studied kinetic models of markets can be mapped to the dynamics of our auto-regressive model. Copyright Springer 2008

Keywords: 02.50.-r Probability theory, stochastic processes, and statistics, 89.65.Gh Economics; econophysics, financial markets, business and management, 05.10.Gg Stochastic analysis methods (Fokker-Planck, Langevin, etc.), (search for similar items in EconPapers)
Date: 2008
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:eurphb:v:65:y:2008:i:4:p:585-589

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DOI: 10.1140/epjb/e2008-00372-9

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