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

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

2003-02-07

arxiv.org/abs/cond-mat/0302147v1

Physics

Condensed Matter

Statistical Mechanics

6 pages, 3 eps figures. To be published in `Application of Econophysics', Ed. H. Takayasu, Springer-Verlag, Tokyo (2003): Proc

Scientific paper

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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