Emergence of Wealth Inequality in Financial Markets: An Agent-Based Econophysical Model

The recent increase in economic inequality has led economists to investigate the mechanisms underlying the emergence of new forms of oligarchic wealth concentration. Econophysics contributes to this debate by providing analytical approaches and simplified frameworks designed to isolate the fundamental processes through which inequality can arise. This thesis presents an agent-based model in which wealth dynamics emerge from pairwise exchanges among heterogeneous agents. Agents trade assets and cash according to their expectations of the fundamental value. MATLAB simulations show that an initially equal society evolves, through sequential decentralized interactions, into a strongly unequal wealth distribution. Market frictions, including asymmetric information and heterogeneity in the variance of expectations, are introduced to analyze their impact on the speed and extent of wealth concentration. In the second part of the thesis, a centralized model with a Walrasian auctioneer is simulated and used as a theoretical benchmark for comparison with the decentralized framework. This comparison highlights that inequality and inefficiency in decentralized markets originate primarily from microstructural frictions, whereas in centralized markets they emerge from informational and behavioral distortions.