Ideal Gas-Like Distributions in Economics: Effects of Saving Propensity
Abstract
We consider the ideal-gas models of trading markets, where each agent is identified with a gas molecule and each trading as an elastic or money-conserving (two-body) collision. Unlike in the ideal gas, we introduce saving propensity
λ
of agents, such that each agent saves a fraction
λ
of its money and trades with the rest. We show the steady-state money or wealth distribution in a market is Gibbs-like for
λ=0
, has got a non-vanishing most-probable value for
λ≠0
and Pareto-like when
λ
is widely distributed among the agents. We compare these results with observations on wealth distributions of various countries.