The Ecological Disaster of Bitterfeld and Chicken Games
Environmental contamination is one limiting factor for privatization of the formerly state owned companies in the eastern part of Germany. The negotiations between the Treuhandanstalt (German Trusteeship Agency) and prospective investors are game-theoretically modelled. It is argued that the prisoner dilemma game is not appropriate to model the environmental contamination as a public good provision problem. The application of the Chicken game leads to more realistic results. Furthermore, the political implications of this situation are analysed.
We thank U. Blum and J. Mönius for helpful comments.
KeywordsNash Equilibrium Public Choice German Democratic Republic Future Investor Ecological Hazard
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