Optimal risk in wealth exchange models: agent dynamics from a microscopic perspective

TL;DR

This paper investigates how individual risk preferences influence agent behavior in wealth exchange models, identifying critical risk levels and optimal strategies for wealth accumulation.

Contribution

It introduces a microscopic perspective on agent strategies, revealing the existence of a critical risk threshold and optimal risk ranges depending on model parameters.

Findings

Agents with risk above a critical value lose everything at equilibrium.

Maximum wealth occurs within a specific risk range influenced by social protection.

Strategies are successful within certain parameter regions.

Abstract

In this work we study the individual strategies carried out by agents undergoing transactions in wealth exchange models. We analyze the role of risk propensity in the behavior of the agents and find a critical risk, such that agents with risk above that value always end up losing everything when the system approaches equilibrium. Moreover, we find that the wealth of the agents is maximum for a range of risk values that depends on particular characteristics of the model, such as the social protection factor. Our findings allow to determine a region of parameters for which the strategies of the economic agents are successful.