Wealth Distributions in Models of Capital Exchange

S. Ispolatov, P. L. Krapivsky and S. Redner
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S. Ispolatov: Boston University
P. L. Krapivsky: Boston University
S. Redner: Boston University

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Abstract: A dynamical model of capital exchange is introduced in which a specified amount of capital is exchanged between two individuals when they meet. The resulting time dependent wealth distributions are determined for a variety of exchange rules. For ``greedy'' exchange, an interaction between a rich and a poor individual results in the rich taking a specified amount of capital from the poor. When this amount is independent of the capitals of the two traders, a mean-field analysis yields a Fermi-like scaled wealth distribution in the long-time limit. This same distribution also arises in greedier exchange processes, where the interaction rate is an increasing function of the capital difference of the two traders. The wealth distribution in multiplicative processes, where the amount of capital exchanged is a finite fraction of the capital of one of the traders, are also discussed. For random multiplicative exchange, a steady state wealth distribution is reached, while in greedy multiplicative exchange a non-steady power law wealth distribution arises, in which the support of the distribution continuously increases. Finally, extensions of our results to arbitrary spatial dimension and to growth processes, where capital is created in an interaction, are presented.

Date: 1997-08
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Published in Eur. Phys. J. B 2, 267-76 (1998)

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