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Modeling wealth distribution in growing markets

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  • Urna Basu
  • P. K. Mohanty

Abstract

We introduce an auto-regressive model which captures the growing nature of realistic markets. In our model agents do not trade with other agents, they interact indirectly only through a market. Change of their wealth depends, linearly on how much they invest, and stochastically on how much they gain from the noisy market. The average wealth of the market could be fixed or growing. We show that in a market where investment capacity of agents differ, average wealth of agents generically follow the Pareto-law. In few cases, the individual distribution of wealth of every agentcould also be obtained exactly. We also show that the underlying dynamics of other well studied kinetic models of markets can be mapped to the dynamics of our auto-regressive model. Copyright Springer 2008

Suggested Citation

  • Urna Basu & P. K. Mohanty, 2008. "Modeling wealth distribution in growing markets," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 65(4), pages 585-589, October.
    • Handle: RePEc:spr:eurphb:v:65:y:2008:i:4:p:585-589
    DOI: 10.1140/epjb/e2008-00372-9
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    Citations

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    Cited by:

    1. Chakrabarti, Anindya S. & Chakrabarti, Bikas K., 2009. "Microeconomics of the ideal gas like market models," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(19), pages 4151-4158.
    2. Chakrabarti, Anindya S., 2012. "Effects of the turnover rate on the size distribution of firms: An application of the kinetic exchange models," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(23), pages 6039-6050.
    3. Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
    4. Max Greenberg & H. Oliver Gao, 2024. "Twenty-five years of random asset exchange modeling," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 97(6), pages 1-27, June.

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