A Stylized Software Model to Explore the Free Market Equality/Efficiency Tradeoff

Abstract

This paper provides an agent-based software exploration of the well-known free market efficiency/equality trade-off. Our study simulates the interaction of agents producing, trading and consuming goods within different market structures, and looks at how efficient the producers/consumers mapping turn out to be as well as the resulting distribution of welfare among agents at the end of an arbitrarily large number of iterations. A competitive market is compared with a random one. Our results confirm that the superior efficiency of the competitive market (an effective producers/consumers mapping and a superior aggregative welfare) comes at a very high price in terms of inequality (above all when severe budget constraints are in play).