Dynamical explanation for the emergence of power law in a stock market model

Power laws are found in a wide range of different systems: From sand piles to word occurrence frequencies and to the size distribution of cities. The natural emergence of these power laws in so many different systems, which has been called self-organized criticality, seems rather mysterious and awaits a rigorous explanation. In this letter we study the stationary regime of a previously introduced dynamical microscopic model of the stock market. We find that the wealth distribution among investors spontaneously converges to a power law. We are able to explain this phenomenon by simple general considerations. We suggest that similar considerations may explain self-organized criticality in many other systems. They also explain the Levy distribution.