Journal
JOURNAL OF ECONOMIC THEORY
Volume 106, Issue 2, Pages 417-435Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1006/jeth.2001.2897
Keywords
equilibrium; wealth distribution; stochastic preferences; gamma distribution; Markov model; exchange market
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We describe an exchange market consisting of many agents with stochastic preferences for two goods. When individuals are indifferent between goods, statistical mechanics predicts that goods and wealth will have steady-state gamma distributions. Simulation studies show that gamma distributions arise for a broader class of preference distributions. We demonstrate this mathematically in the limit of large numbers of individual agents. These studies illustrate the potential power of a statistical mechanical approach to stochastic models in economics and suggest that gamma distributions will describe steady-state wealths for a class of stochastic models with periodic redistribution of conserved quantities. Journal of Economic Literature Classification Numbers: C15, C62, C73, D3, D5. (C) 2002 Elsevier science (USA).
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