Centre for Modeling and Simulation
Savitribai Phule Pune University All Models Are False, Some Are Useful

Technical Report CMS-TR-20070421


Title Emergence of Power Law in a Market with Mixed Models
Author/s Prashant M. Gade
Centre for Modeling and Simulation, Savitribai Phule Pune University, Pune 411 007 India


M. Ali Saif
Department of Physics, Savitribai Phule Pune University, Pune 411 007 India
Abstract We investigate the problem of wealth distribution from the viewpoint of asset exchange. Robust nature of Pareto's law across economies, ide- ologies and nations suggests that this could be an outcome of trading strategies. However, the simple asset exchange models fail to reproduce this feature. A yardsale (YS) model in which amount put on the bet is a fraction of minimum of the two players leads to condensation of wealth in hands of some agent while theft and fraud (TF) model in which the amount to be exchanged is a fraction of loser's wealth leads to an exponential distribution of wealth. We show that if we allow few agents to follow a different model than others, i.e. there are some agents following TF model while rest follow YS model, it leads to distribution with power law tails. Similar ect is observed when one carries out transactions for a fraction of one's wealth using TF model and for the rest YS model is used. We also observe a power law tail in wealth distribution if we allow the agents to follow either of the models with some probability.
Keywords
Download [743K pdf]
Citing This Document Prashant M. Gade, and M. Ali Saif , Emergence of Power Law in a Market with Mixed Models . Technical Report CMS-TR-20070421 of the Centre for Modeling and Simulation, Savitribai Phule Pune University, Pune 411007, India (2007); available at http://cms.unipune.ac.in/reports/.
Notes, Published Reference, Etc. Accepted for publication in Physica A.
Contact gade AT cms.unipune.ac.in
Supplementary Material


About | People | Programmes | ResearchReports
Alumni | Announcements | WebMail | Contact



© 2004-17 Centre for Modeling and Simulation
Valid HTML 4.01!