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Statistical mechanics of money: How saving propensity affects its distribution

Anirban Chakraborti and Bikas K. Chakrabarti

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Abstract: We consider a simple model of a closed economic system where the total money is conserved and the number of economic agents is fixed. In analogy to statistical systems in equilibrium, money and the average money per economic agent are equivalent to energy and temperature, respectively. We investigate the effect of the saving propensity of the agents on the stationary or equilibrium money distribution.The equilibrium probablity distribution of money becomes the usual Gibb's distribution, characteristic of non-interacting agents, when the agents do not save. However with saving, even for local or individual self-interest, the dynamics become cooperative and the resulting asymmetric Gaussian-like stationary distribution acquires global ordering properties. Intriguing singularities are observed in the stationary money distribution in the market, as function of the ``marginal saving propensity'' of the agents.

Date: 2000-04, Revised 2000-06
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Published in Eur. Phys. J. B 17, 167 (2000)

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