Economy – Quantitative Finance – General Finance
Scientific paper
2011-08-29
Economy
Quantitative Finance
General Finance
Scientific paper
Many recent models of trade dynamics use the simple idea of wealth exchanges among economic agents in order to obtain a stable or equilibrium distribution of wealth among the agents. In particular, a plain analogy compares the wealth in a society with the energy in a physical system, and the trade between agents to the energy exchange between molecules during collisions. In physical systems, the energy exchange among molecules leads to a state of equipartition of the energy and to an equilibrium situation where the entropy is a maximum. On the other hand, in the majority of exchange models, the system converges to a very unequal condensed state, where one or a few agents concentrate all the wealth of the society while the wide majority of agents shares zero or almost zero fraction of the wealth. So, in those economic systems a minimum entropy state is attained. We propose here an analytical model where we investigate the effects of a particular class of economic exchanges that minimize the entropy. By solving the model we discuss the conditions that can drive the system to a state of minimum entropy, as well as the mechanisms to recover a kind of equipartition of wealth.
de Almeida Rita M. C.
Iglesias J. R.
No associations
LandOfFree
Entropy and equilibrium state of free market models does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.
If you have personal experience with Entropy and equilibrium state of free market models, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Entropy and equilibrium state of free market models will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-127390