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Ideal Gas-Like Distributions in Economics: Effects of Saving Propensity

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  • Bikas K. Chakrabarti
  • Arnab Chatterjee

Abstract

We consider the ideal-gas models of trading markets, where each agent is identified with a gas molecule and each trading as an elastic or money-conserving (two-body) collision. Unlike in the ideal gas, we introduce saving propensity $\lambda$ of agents, such that each agent saves a fraction $\lambda$ of its money and trades with the rest. We show the steady-state money or wealth distribution in a market is Gibbs-like for $\lambda=0$, has got a non-vanishing most-probable value for $\lambda \ne 0$ and Pareto-like when $\lambda$ is widely distributed among the agents. We compare these results with observations on wealth distributions of various countries.

Suggested Citation

  • Bikas K. Chakrabarti & Arnab Chatterjee, 2003. "Ideal Gas-Like Distributions in Economics: Effects of Saving Propensity," Papers cond-mat/0302147, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/0302147
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    References listed on IDEAS

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    1. Stanley, H.E. & Afanasyev, V. & Amaral, L.A.N. & Buldyrev, S.V. & Goldberger, A.L. & Havlin, S. & Leschhorn, H. & Maass, P. & Mantegna, R.N. & Peng, C.-K. & Prince, P.A. & Salinger, M.A. & Stanley, M., 1996. "Anomalous fluctuations in the dynamics of complex systems: from DNA and physiology to econophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 224(1), pages 302-321.
    2. Chakraborti, Anirban & Pradhan, Srutarshi & Chakrabarti, Bikas K., 2001. "A self-organising model of market with single commodity," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 297(1), pages 253-259.
    3. A. Drăgulescu & V.M. Yakovenko, 2001. "Evidence for the exponential distribution of income in the USA," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 20(4), pages 585-589, April.
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