Strategic Network Abandonment

TL;DR

This paper develops a framework for understanding how socio-economic networks experience sudden declines due to strategic agent decisions influenced by outside opportunities and network effects, revealing different decay patterns based on the strength of strategic complementarities.

Contribution

It introduces a model of strategic network abandonment that explains diverse decay dynamics and guides intervention strategies based on network structure and agent interdependence.

Findings

Weak complementarities lead to local, threshold-driven cascades.

Strong complementarities cause global, rupture-like collapses.

Targeting central agents is effective under strong complementarities.

Abstract

Socio-economic networks, from cities and firms to collaborative projects, often appear resilient for long periods before experiencing rapid, cascading decline as participation erodes. We explain such dynamics through a framework of strategic network abandonment, in which interconnected agents choose activity levels in a network game and remain active only if participation yields higher utility than an improving outside option. As outside opportunities rise, agents exit endogenously, triggering equilibrium readjustments that may either dissipate locally or propagate through the network. The resulting decay dynamics are governed by the strength of strategic complementarities, measuring how strongly an agent's incentives depend on the actions of others. When complementarities are weak, decay follows a heterogeneous threshold process analogous to bootstrap percolation: failures are driven by local neighborhoods, vulnerable clusters can be identified ex ante, and large cascades emerge only through bottom-up accumulation of fragility. When complementarities are strong, departures propagate globally, producing rupture-like dynamics characterized by metastable plateaus, abrupt system-wide collapse, and limited predictive power of standard spectral or structural indicators. The comparative effective of intervention depends on the strength of complementarity as well: Supporting central agents is most effective under strong complementarities, whereas targeting marginal agents is essential when complementarities are weak. Together, our results reveal how outside options, network structure, and strategic interdependence jointly determine both the fragility of socio-economic networks and the policies required to sustain them.