Finite market size as a source of extreme wealth inequality and market instability

Zhi-Feng Huang and Sorin Solomon

Papers from arXiv.org

Abstract: We study the finite-size effects in some scaling systems, and show that the finite number of agents N leads to a cut-off in the upper value of the Pareto law for the relative individual wealth. The exponent $\alpha$ of the Pareto law obtained in stochastic multiplicative market models is crucially affected by the fact that N is always finite in real systems. We show that any finite value of N leads to properties which can differ crucially from the naive theoretical results obtained by assuming an infinite N. In particular, finite N may cause in the absence of an appropriate social policy extreme wealth inequality $\alpha

Date: 2001-03
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Citations: View citations in EconPapers (11)

Published in Physica A 294, 503-513 (2001)

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Journal Article: Finite market size as a source of extreme wealth inequality and market instability (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:cond-mat/0103170

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