We derive the equation of motion for the field density matrix of the degenerate two-photon laser under conditions of two-photon resonance starting from the full microscopic Hamiltonian. Our results are compared with the corresponding quantities obtained from the standard effective Hamiltonian. As we have shown for the nondegenerate case, the full diagonal density-matrix equations tend to the effective Hamiltonian density-matrix equations in an appropriate limit, but the equations of motion for the off-diagonal elements do not coincide. The equations obtained using a more accurate form of the effective Hamiltonian, in which Stark shifts are included, do agree. In this paper we concentrate on the photon-number distribution and the nature of the phase transition that takes place in the neighborhood of the two-photon lasing transition threshold. We determine the steady-state mean photon numbers and consider the stability of the solutions. A solution is found where the mean photon number is zero, but this is found to be a stable solution only for sufficiently weak pumping, whereas in the standard effective Hamiltonian approach it is always stable. As the pumping strength is increased, a range of detunings is reached in which there are two stable solutions. The amplitude of the zero-photon peak diminishes very rapidly as the pumping strength increases. Finally, for sufficiently large detunings, a single, stable, steady-state solution is obtained. The nature of the phase transition is illustrated by presenting plots of the photon-number distribution against detuning and pumping rate. The photon-number fluctuations about the mean are also discussed.
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