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Money in Gas-Like Markets: Gibbs and Pareto Laws

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  • Arnab Chatterjee
  • Bikas K. Chakrabarti
  • S. S. Manna
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    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.

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    File URL: http://arxiv.org/pdf/cond-mat/0311227
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number cond-mat/0311227.

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    Date of creation: Nov 2003
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    Publication status: Published in Physica Scripta T106 (2003) 36-38
    Handle: RePEc:arx:papers:cond-mat/0311227

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    Web page: http://arxiv.org/

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    Cited by:
    1. Geoff Willis, 2004. "Laser Welfare: First Steps in Econodynamic Engineering," Microeconomics 0408003, EconWPA.
    2. Patriarca, Marco & Chakraborti, Anirban & Germano, Guido, 2006. "Influence of saving propensity on the power-law tail of the wealth distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 369(2), pages 723-736.
    3. Kočišová, J. & Horváth, D. & Brutovský, B., 2009. "The efficiency of individual optimization in the conditions of competitive growth," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(17), pages 3585-3592.
    4. Chakrabarti, Anindya S. & Chakrabarti, Bikas K., 2010. "Statistical theories of income and wealth distribution," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(4), pages 1-31.
    5. John Angle, 2007. "The Macro Model of the Inequality Process and The Surging Relative Frequency of Large Wage Incomes," Papers 0705.3430, arXiv.org.
    6. Anirban Chakraborti & Ioane Muni Toke & Marco Patriarca & Frédéric Abergel, 2011. "Econophysics: agent-based models," Post-Print hal-00621059, HAL.

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