Deconstructing the Enron Bubble: The Context of Natural Ponzi Schemes and the Financial Saturation Hypothesis

Darius Karaša, Žilvinas Drabavičius, Stasys Girdzijauskas and Ignas Mikalauskas ()
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Darius Karaša: Lithuanian Energy Institute, Breslaujos Street 3, 44403 Kaunas, Lithuania
Žilvinas Drabavičius: Kaunas Faculty, Vilnius University, Muitinės Street 8, 44280 Kaunas, Lithuania
Stasys Girdzijauskas: Kaunas Faculty, Vilnius University, Muitinės Street 8, 44280 Kaunas, Lithuania
Ignas Mikalauskas: Faculty of Marine Technologies and Natural Sciences, Klaipeda University, Bijunų Str. 17, 91225 Klaipeda, Lithuania

JRFM, 2025, vol. 18, issue 8, 1-18

Abstract: This study examines the Enron collapse through an integrated theoretical framework combining the financial saturation paradox with the dynamics of a naturally occurring Ponzi process. The central objective is to evaluate whether endogenous market mechanisms—beyond managerial misconduct—played a decisive role in the emergence and breakdown of the Enron stock bubble. A logistic-growth-based saturation model is formulated, incorporating positive feedback effects and bifurcation thresholds, and applied to Enron’s stock price data from 1996 to 2001. The computations were performed using LogletLab 4 (version 4.1, 2017) and Microsoft ® Excel ® 2016 MSO (version 2507). The model estimates market saturation ratios (P/Pp) and logistic growth rate (r), treating market potential, initial price, and time as constants. The results indicate that Enron’s share price approached a saturation level of approximately 0.9, signaling a hyper-accelerated, unsustainable growth phase consistent with systemic overheating. This finding supports the hypothesis that a naturally occurring Ponzi dynamic was underway before the firm’s collapse. The analysis further suggests a progression from market-driven expansion to intentional manipulation as the bubble matured, linking theoretical saturation stages with observed price behavior. By integrating behavioral–financial insights with saturation theory and Natural Ponzi dynamics, this work offers an alternative interpretation of the Enron case and provides a conceptual basis for future empirical validation and comparative market studies.

Keywords: natural Ponzi; financial saturation; behavioral finance; Enron scandal; positive feedback loops; financial bubbles (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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