Wealth exchange under ceiling and flooring constraints: a modified Bennati-Dragulescu-Yakovenko model

Abstract

We investigate the classical Bennati-Dragulescu-Yakovenko (BDY) dollar exchange model introduced in \cite{dragulescu_statistical_2000} where the effects of wealth ceiling and wealth flooring are explored. In our model, $N$ identical economical agents involved in the BDY game are also subjected to certain policies issued by a (artificial) government, which prevent agents whose wealth exceeds some prescribed threshold value (denoted by $b\in {\mathbb{N}}_{+}$) from receiving money and which prohibit agents whose wealth falls below certain threshold value (denoted by $a\in \mathbb{N}$) from giving out their money. We derive a mean-field system of coupled nonlinear ordinary differential equations (ODEs) governing the evolution of the distribution of money as the number of agents $N$ tends to infinity and study the large time behavior of the resulting ODE system. The impact of a wealth cap and a wealth floor on economic inequality (measured by the Gini index) will also be explored numerically.

25 pages, 6 figures