Finite market size as a source of extreme wealth inequality and market instability
AbstractWe 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 α 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 α<1 and market instability.
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Bibliographic InfoArticle provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.
Volume (Year): 294 (2001)
Issue (Month): 3 ()
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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/
Power law; Multiplicative process; Cut-off; Finite-size effect;
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