A Unified Framework for the Pareto Law and Matthew Effect using Scale-Free Networks

Abstract

We investigate the accumulated wealth distribution by adopting evolutionary games taking place on scale-free networks. The system self-organizes to a critical Pareto distribution (1897) of wealth $P(m)\sim m^{-(v+1)}$ with $1.6<v<2.0$ (which is in agreement with that of U.S. or Japan). Particularly, the agent's personal wealth is proportional to its number of contacts (connectivity), and this leads to the phenomenon that the rich gets richer and the poor gets relatively poorer, which is consistent with the Matthew Effect present in society, economy, science and so on. Though our model is simple, it provides a good representation of cooperation and profit accumulation behavior in economy, and it combines the network theory with econophysics.

5 pages, 8 figures

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• The dynamics of financial stability in complex networks
• Discretized kinetic theory on scale-free networks
• The topology of card transaction money flows