Pareto Law in a Kinetic Model of Market with Random Saving Propensity

@article{Chatterjee2004ParetoLI,
title={Pareto Law in a Kinetic Model of Market with Random Saving Propensity},
author={A. Chatterjee and B. Chakrabarti and S. S. Manna},
journal={Physica A-statistical Mechanics and Its Applications},
year={2004},
volume={335},
pages={155-163}
}

Physica A-statistical Mechanics and Its Applications

We have numerically simulated 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 (quenched) saving propensity of the agents, distributed widely between the agents (0⩽λ<1). The system remarkably self-organizes to a critical Pareto distribution of money P(m)∼m−(ν+1) with ν≃1. We analyze the robustness (universality) of the distribution in the model… CONTINUE READING