Breakdown of the mean-field approximation in a wealth distribution model

Matus Medo

Papers from arXiv.org

Abstract: One of the key socioeconomic phenomena to explain is the distribution of wealth. Bouchaud and M\'ezard have proposed an interesting model of economy [Bouchaud and M\'ezard (2000)] based on trade and investments of agents. In the mean-field approximation, the model produces a stationary wealth distribution with a power-law tail. In this paper we examine characteristic time scales of the model and show that for any finite number of agents, the validity of the mean-field result is time-limited and the model in fact has no stationary wealth distribution. Further analysis suggests that for heterogeneous agents, the limitations are even stronger. We conclude with general implications of the presented results.

Date: 2008-09, Revised 2008-11
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Citations: View citations in EconPapers (1)

Published in Journal of Statistical Mechanics, P02014 (2009)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0809.4139

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