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A Pyramid Scheme Model Based on "Consumption Rebate" Frauds

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  • Yong Shi
  • Bo Li
  • Wen Long

Abstract

There are various types of pyramid schemes which have inflicted or are inflicting losses on many people in the world. We propose a pyramid scheme model which has the principal characters of many pyramid schemes appeared in recent years: promising high returns, rewarding the participants recruiting the next generation of participants, and the organizer will take all the money away when he finds the money from the new participants is not enough to pay the previous participants interest and rewards. We assume the pyramid scheme carries on in the tree network, ER random network, SW small-world network or BA scale-free network respectively, then give the analytical results of how many generations the pyramid scheme can last in these cases. We also use our model to analyse a pyramid scheme in the real world and we find the connections between participants in the pyramid scheme may constitute a SW small-world network.

Suggested Citation

  • Yong Shi & Bo Li & Wen Long, 2019. "A Pyramid Scheme Model Based on "Consumption Rebate" Frauds," Papers 1904.08136, arXiv.org, revised Jun 2019.
    • Handle: RePEc:arx:papers:1904.08136
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    References listed on IDEAS

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    1. M. E. J. Newman & D. J. Watts, 1999. "Scaling and Percolation in the Small-World Network Model," Working Papers 99-05-034, Santa Fe Institute.
    2. Artzrouni, Marc, 2009. "The mathematics of Ponzi schemes," Mathematical Social Sciences, Elsevier, vol. 58(2), pages 190-201, September.
    3. Zhu, Anding & Fu, Peihua & Zhang, Qinghe & Chen, Zhenyue, 2017. "Ponzi scheme diffusion in complex networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 479(C), pages 128-136.
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    Cited by:

    1. Yong Shi & Bo Li & Guangle Du, 2021. "Pyramid scheme in stock market: a kind of financial market simulation," Papers 2102.02179, arXiv.org, revised Feb 2021.

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