Faculté des sciences

Breakdown of the mean-field approximation in a wealth distribution model

Medo, Matúš

In: Journal of Statistical Mechanics, 2009, p. P02014

One of the key socioeconomic phenomena to explain is the distribution of wealth. Bouchaud and Mézard (2000 Physica A 282 536) have proposed an interesting model of an economy based on trade and investments of agents. In the mean-field approximation, the model produces a stationary wealth distribution with a power law tail. In this paper we examine characteristic timescales of the model and show... Plus

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    Summary
    One of the key socioeconomic phenomena to explain is the distribution of wealth. Bouchaud and Mézard (2000 Physica A 282 536) have proposed an interesting model of an economy based on trade and investments of agents. In the mean-field approximation, the model produces a stationary wealth distribution with a power law tail. In this paper we examine characteristic timescales of the model and show that for any finite number of agents, the validity of the mean-field result is time-limited and the model in fact has no stationary wealth distribution. Further analysis suggests that for heterogeneous agents, the limitations are even stronger. We conclude with general implications of the results presented.