Evolution of wealth in a nonconservative economy driven by local Nash equilibria
Pierre Degond (),
Jian-Guo Liu () and
Christian Ringhofer ()
Additional contact information
Pierre Degond: Department of Mathematics - Imperial College London - Imperial College London
Jian-Guo Liu: Duke Physics - Duke university [Durham]
Christian Ringhofer: Department of Mathematics - Arizona State University
Working Papers from HAL
We develop a model for the evolution of wealth in a non-conservative economic environment, extending a theory developed earlier by the authors. The model considers a system of rational agents interacting in a game theoretical framework. This evolution drives the dynamic of the agents in both wealth and economic configuration variables. The cost function is chosen to represent a risk averse strategy of each agent. That is, the agent is more likely to interact with the market, the more predictable the market, and therefore the smaller its individual risk. This yields a kinetic equation for an effective single particle agent density with a Nash equilibrium serving as the local thermodynamic equilibrium. We consider a regime of scale separation where the large scale dynamics is given by a hydrodynamic closure with this local equilibrium. A class of generalized collision invariants (GCIs) is developed to overcome the difficulty of the non-conservative property in the hydrodynamic closure derivation of the large scale dynamics for the evolution of wealth distribution. The result is a system of gas dynamics-type equations for the density and average wealth of the agents on large scales. We recover the inverse Gamma distribution, which has been previously considered in the literature, as a local equilibrium for particular choices of the cost function.
New Economics Papers: this item is included in nep-evo and nep-ger
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00967662
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Published in 2014
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-00967662
Access Statistics for this paper
More papers in Working Papers from HAL
Series data maintained by CCSD ().