%0 Journal Article
%T Finite market size as a source of extreme wealth inequality and market instability
%A Zhi-Feng Huang
%A Sorin Solomon
%J Quantitative Finance
%D 2001
%I arXiv
%R 10.1016/S0378-4371(01)00113-3
%X We study the finite-size effects in some scaling systems, and show that the finite number of agents N leads to a cut-off in the upper value of the Pareto law for the relative individual wealth. The exponent $\alpha$ of the Pareto law obtained in stochastic multiplicative market models is crucially affected by the fact that N is always finite in real systems. We show that any finite value of N leads to properties which can differ crucially from the naive theoretical results obtained by assuming an infinite N. In particular, finite N may cause in the absence of an appropriate social policy extreme wealth inequality $\alpha < 1$ and market instability.
%U http://arxiv.org/abs/cond-mat/0103170v1