Preprint v1.1. This paper develops a formal theory of rational ruin, where organizations strategically accept collapse risks under competitive pressure and horizon compression. The model explains how locally rational decisions can generate systemic instability, particularly in environments with short evaluation horizons, asymmetric enforcement, and competitive escalation dynamics. The framework contributes to organizational economics, strategic failure theory, and institutional risk analysis. Series: Institutional Failure and Strategic Collapse Research Stream.
Rei Kumaki (Thu,) studied this question.