Kinetic exchange models of markets

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Kinetic exchange models are multi-agent dynamic models inspired by the

energy distribution
, which try to explain the robust and universal features of income/wealth distributions.

Understanding the distributions of income and wealth in an economy has been a classic problem in economics for more than a hundred years. Today it is one of the main branches of econophysics.

Data and basic tools

In 1897,

log-normal
.

Basic tools used in this type of modelling are

Monte Carlo simulations
often come handy in solving these models.

Overview of the models

Since the distributions of income/wealth are the results of the interaction among many heterogeneous agents, there is an analogy with statistical mechanics, where many particles interact. This similarity was noted by Meghnad Saha and B. N. Srivastava in 1931[2] and thirty years later by Benoit Mandelbrot.[3] In 1986, an elementary version of the stochastic exchange model was first proposed by J. Angle.[4]

In the context of kinetic theory of gases, such an exchange model was first investigated by A. Dragulescu and V. Yakovenko.

empirical
cases of income/wealth distributions.

Though this theory had been originally derived from the

utility function. Recently it has been shown [12] that an extension of the Cobb-Douglas utility function (in the above-mentioned Chakrabarti-Chakrabarti formulation) by adding a production savings factor leads to the desired feature of growth of the economy in conformity with some earlier phenomenologically established growth laws in the economics literature. The exact distributions produced by this class of kinetic models are known only in certain limits and extensive investigations have been made on the mathematical structures of this class of models.[13][14]
The general forms have not been derived so far.

Criticisms

This class of models has attracted criticisms from many dimensions.

law of conservation
for income/wealth has also been a subject of criticism.

See also

References

  1. ^ Chatterjee, A.; Yarlagadda, S.; Chakrabarti, B.K. (2005). Econophysics of Wealth Distributions. Springer-Verlag (Milan).
  2. Bikas K Chakrabarti, Towards a physics of economics
    , Physics News 39(2) 33-46, April 2009)
  3. JSTOR 2525289
    .
  4. JSTOR 2578675
    .
  5. S2CID 16158313
    .
  6. S2CID 119517302
    .
  7. ^
    S2CID 5138071
    .
  8. ^
    S2CID 120904131
    .
  9. Bibcode:2008arXiv0807.4484G
    .
  10. S2CID 909820
    .
  11. S2CID 14908064
    .
  12. S2CID 224849350
    .
  13. PMID 19113186
    .
  14. S2CID 10218909
    .
  15. doi:10.1016/j.physa.2006.04.029.{{cite journal}}: CS1 maint: multiple names: authors list (link
    )

Further reading
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