Agent Based Approaches to Income Distributions and the Impact of Memory

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Agent based models have been used to study the dynamics of wealth or income distributions in populations. In this chapter we develop a generic theory of interacting agents where the property of memory may be included. The model may be analysed both analytically and numerically via computer simulation. Particular regimes are analysed and compared with empirical data for both the UK and the Republic of Ireland. We also demonstrate that with the inclusion of memory the predicted wealth distribution can exhibit Pareto tails with values of the exponent that are greater than unity unlike the model without memory where the exponent is always unity.