2007/10/04 by Marisciel L. Palima, Palima, Marisciel L., Eduardo J. David +1
Economics, Econometrics and Finance · Physics and Astronomy · #Advanced Thermodynamics and Statistical Mechanics #Complex Systems and Time Series Analysis #Computational Physics (physics.comp-ph) #Economic theories and models #FOS: Economics and business #FOS: Physical sciences #General Finance (q-fin.GN) #Physics and Society (physics.soc-ph)
paper · pdf · doi:10.48550/arxiv.0710.1014
openalex publication_date 2007/10/04 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We model a closed economic system with interactions that generates the features of empirical wealth distribution across all wealth brackets, namely a Gibbsian trend in the lower and middle wealth range and a Pareto trend in the higher range, by simply limiting the an agents' interaction to only agents with nearly the same wealth. To do this, we introduce a parameter BETA that limits the range on the wealth of a partner with which an agent is allowed to interact. We show that this wealth-limited interaction is enough to distribute wealth in a purely power law trend. If the interaction is not wealth limited, the wealth distribution is expectedly Gibbsian. The value of BETA where the transition from a purely Gibbsian law to a purely power law distribution happens depends on whether the choice of interaction partner is mutual nor not. For a non-mutual choice, where the richer agent gets to decide, the transition happens at BETA=1.0. For a mutual choice, the transition is at BETA= 0.60. In order to generate a mixed Gibbs-Pareto distribution, we apply another wealth-based rule that depends on the parameter wlimit. An agent whose wealth is below wlimit can choose any partner to interact with, while an agent whose wealth is above wlimit is subject to the wealth-limited range in his choice of partner. A Gibbs-Pareto distribution appears if both these wealth-based rules are applied.