Statistical Equilibrium Wealth Distributions in an Exchange Economy with Stochastic Preferences
Abstract 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.