Rational Adversaries and the Maintenance of Fragility: A Game-Theoretic Theory of Rational Stagnation

TL;DR

This paper develops a game-theoretic model explaining how rational adversaries maintain fragile, suboptimal stable states in cooperative systems, with applications to social media and political trust.

Contribution

It introduces a new utility-based framework for understanding rational stagnation and analyzes strategic regimes in dynamic, stochastic environments.

Findings

Identifies a fragile cooperation band where multiple equilibria exist.

Classifies three strategic regimes: destruction, stagnation, and abandonment.

Demonstrates robustness of the model under reference shifts.

Abstract

Cooperative systems often remain in persistently suboptimal yet stable states. This paper explains such "rational stagnation" as an equilibrium sustained by a rational adversary whose utility follows the principle of potential loss, $u_{D} = U_{ideal} - U_{actual}$. Starting from the Prisoner's Dilemma, we show that the transformation $u_{i}' = a\,u_{i} + b\,u_{j}$ and the ratio of mutual recognition $w = b/a$ generate a fragile cooperation band $[w_{\min},\,w_{\max}]$ where both (C,C) and (D,D) are equilibria. Extending to a dynamic model with stochastic cooperative payoffs $R_{t}$ and intervention costs $(C_{c},\,C_{m})$, a Bellman-style analysis yields three strategic regimes: immediate destruction, rational stagnation, and intervention abandonment. The appendix further generalizes the utility to a reference-dependent nonlinear form and proves its stability under reference shifts, ensuring robustness of the framework. Applications to social-media algorithms and political trust illustrate how adversarial rationality can deliberately preserve fragility.