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Reducing Inequality through Risk Control in the Yard-Sale Model
Building: Cero Infinito
Room: Posters hall
Date: 2024-12-10 04:30 PM – 06:30 PM
Last modified: 2024-11-19
Abstract
Econophysics allows us to explore economic issues, like wealth inequality in a society, using methods and models from physics. One example of these methods is agent-based simulations, inspired by the development of kinetic gas theory.
A simple and widely used model in Econophysics is the Yard-Sale Model, which describes an interaction where two economic agents exchange wealth. In this model, each agent bets a fraction of their wealth, and a winner is chosen with a certain probability. The amount exchanged is the minimum of the two bets and agents are differentiated by their risk value, which is the fraction of wealth they are willing to bet.
In this work, we study how the system’s behavior changes when modifying the distribution of risks. The main result observed is that limiting the maximum risk agents can take has a significant impact on the final state, reducing system inequality, as measured by the Gini coefficient, and increasing the number of agents with non-zero wealth.
A simple and widely used model in Econophysics is the Yard-Sale Model, which describes an interaction where two economic agents exchange wealth. In this model, each agent bets a fraction of their wealth, and a winner is chosen with a certain probability. The amount exchanged is the minimum of the two bets and agents are differentiated by their risk value, which is the fraction of wealth they are willing to bet.
In this work, we study how the system’s behavior changes when modifying the distribution of risks. The main result observed is that limiting the maximum risk agents can take has a significant impact on the final state, reducing system inequality, as measured by the Gini coefficient, and increasing the number of agents with non-zero wealth.