RKM- Nash Base Equilibrium and Inflation Driven by Equity Buybacks

Abstract

"Nash Equilibrium and Inflation Driven by Equity Buybacks" presents a game-theoretic model in which large firms/financial institutions choose between productive investment and equity buybacks. It shows that under Nash equilibrium, buybacks become the rational strategy for every firm — since they push up stock prices, expand collateral value, and increase access to leverage. This drives asset-based inflation (rather than wage-based inflation): rising asset prices → more collateral → more credit creation → monetary expansion. The model introduces an "amplification factor" (Λ) — when it exceeds 1, the system becomes a self-reinforcing bubble, which (using logistic-growth and phase-transition equations) eventually leads to a finite-time price collapse. Conclusion: what's individually rational for each firm (maximizing buybacks and leverage) is destabilizing for the system as a whole — a classic coordination failure, where capital flows away from the real economy and into financial engineering.