Abstract
We study the model of interacting agents proposed by Chakraborti and Chakrabarti [Eur. Phys. J. B 17 (2000) 167] that allows agents to both save and exchange wealth. Closed equations for the wealth distribution are developed using a mean field approximation. We show that when all agents have the same fixed savings propensity, subject to certain well-defined approximations defined in the text, these equations yield the conjecture proposed by Chakraborti and Chakrabarti [Eur. Phys. J. B 17 (2000) 167] for the form of the stationary agent wealth distribution. If the savings propensity for the equations is chosen according to some random distribution, we show further that the wealth distribution for large values of wealth displays a Pareto-like power-law tail, i.e., P ( w ) ∼ w 1 + a . However, the value of a for the model is exactly 1. Exact numerical simulations for the model illustrate how, as the savings distribution function narrows to zero, the wealth distribution changes from a Pareto form to an exponential function. Intermediate regions of wealth may be approximately described by a power law with a > 1 . However, the value never reaches values of ∼ 1.6 –1.7 that characterise empirical wealth data. This conclusion is not changed if three-body agent exchange processes are allowed. We conclude that other mechanisms are required if the model is to agree with empirical wealth data.
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