finding Phasing out a risky technology: An endgame problem in German plants? Markus Schöbel, Ralph Hertwig, & Jörg Rieskamp

abstract * Germany has twice decided to abandon nuclear energy. The first time, it set somewhat dynamic shutdown dates for plants before changing course. The second time, it set fixed shutdown dates. Game theory holds that awareness of shutdown dates may lead to endgame behavior, in which people at all levels of the industry behave more self-interestedly, thus potentially jeopardizing public safety, as the end dates approach. We examine whether such behavior is occurring in Germany by drawing on three sources of evidence: the public record, the frequencies of reportable safety-related events, and experimental data. The findings are inconclusive but suggest that the concerns merit consideration by policymakers in Germany or wherever policies need to be designed for the phaseout of dying industries. Counterintuitively, a policy designed to increase public safety may inadvertently create novel risks if it does not attend closely enough to the behavioral factors involved in its implementation.

Schöbel, M., Hertwig, R., & Rieskamp, J. (2017). Phasing out a risky technology: An endgame problem in German nuclear power plants? Behavioral Science & Policy, 3(2), 41–54.

a publication of the behavioral science & policy association 41 n the wake of the Fukushima Daiichi nuclear Endgame Behavior in accident in Japan in March 2011, the German Finitely Repeated Games Igovernment decided—once again—to phase Generally speaking, game theory considers out the country’s use of nuclear energy. It conflict and cooperation between rational deci- was the second time the nation had opted to sionmakers. Theorists analyze these interactions abandon nuclear energy. In 2001, the govern- across a wide range of games, with different ment had assigned each games representing different properties of real- a residual electricity output—a total amount world interactions. One important property is w of electricity it was to produce in the years the time horizon: games can be one-shot or ahead;1 once that total was reached, the plant repeated. A repeated game with a finite time Core Findings was to be taken off the grid. In October 2010, horizon is played a known, specific number the government, now with different leadership of times. There are also indefinitely repeated What is the issue? in place, reversed this plan, deciding to allow games, in which the players do not know when Decommissioning high the country’s 17 nuclear plants to operate until the repetition will stop; that is, there is no preor- reliability organizations at least 2036. But in June 2011, mindful of the such as nuclear power dained number of repetitions. In this article, utilities carries risks public’s concerns about nuclear safety after the though, we focus mainly on finite time horizons, of endgame behavior. Fukushima disaster and the recommendations because Germany’s 2011 phaseout plan calls for With a finite horizon for of an expert commission, the government shut reactors to be shut down on fixed dates. operation, it is possible that agents will behave down eight plants immediately and specified self-interestedly and shift shutdown dates for the remaining nine. These Game theory holds that people who play finite behavior and investment appointed dates ranged from 2015 to 2022 and games will behave the same way regardless of away from safety. This, cannot be exceeded. In other words, if anything whether the game is played once or multiple in turn, may increase the frequency of events with a disrupts energy production for a time (such as times. In finitely repeated games, optimal higher safety significance planned outages and unexpected events), the behavior is determined by backward induction: as the shutdown date of close date will not be extended to compen- players anticipate their optimal moves for the a plant approaches. sate for the hiatus.2 This fresh commitment to last period (that is, the last round) of the game, How can you act? closing down nuclear power plants was the start then for the second-to-last period, and continue Selected recommendations of Germany’s Energiewende, or energy transi- the process backward to the first period. In include: tion—its shift away from nuclear power and theory, if a one-period game is repeated finitely, 1) Increasing data transparency in fossil fuels to renewable energies. then the game-theoretical prediction for the plant operations so one-period game holds for every period of the that endgame risks The 2011 phaseout policy was established to repeated game. For instance, in a social dilemma can be assessed protect Germany from the risks of nuclear situation, in which a person can contribute to 2) Establishing innovative engineering programs energy production in the long term. We argue the general good or else behave opportunisti- focused on the that in the short term, the design of the phaseout cally, game theory holds that a self-interested decommissioning and scenario can have unintended consequences player should not contribute to a public good in dismantling of aging nuclear power plants for nuclear safety. We base our argument in part either a one-period game or a finitely repeated on studies of game theory. Specifically, working game. Experimental economists have shown, Who should take in or managing a plant that is scheduled to however, that people do not strictly conform to the lead? be shut down on a specific date is not unlike this prediction. In fact, people initially cooperate Behavioral science participating in a repeated game that will end in finitely repeated social dilemma games, but researchers, and 3–5 policymakers in energy. in the near future. Empirical evidence from then endgame behavior takes over: cooperation finitely repeated games predicts an increase typically declines and free riding increases over in endgame behavior—a shift toward self-­ the course of the game.5–9 interested behavior as the game’s conclusion draws near. In the case of Germany’s nuclear We suggest, therefore, that phaseout policies power plants, this could mean that the industry with predetermined shutdown dates carry the or individual employees change their behavior risk of fostering detrimental endgame behavior as the shutdown date of each plant approaches, in any dying high-reliability organization—one which could affect public safety. that is prone to accidents unless great vigi- lance is maintained. In this context, we think of

42 behavioral science & policy | volume 3 issue 2 2017 endgame behavior as a multilevel phenomenon, ownership of all nuclear power plants and the with safety risks stemming from self-interested associated risks should be transferred to a public behavior occurring at the level of the individual trust. The trust would be responsible for oper- on up to the level of organizations. ating the plants until they wound down and then for their decommissioning and dismantling, To the best of our knowledge, no previous as well as for the final disposal of radioactive research has examined the potential risks of waste. In other words, the trust would free endgame behavior in high-reliability indus- the utilities from any liability. In exchange, the tries faced with organizational demise. At this utilities would contribute around €30 billion in point, the possibility that Germany’s decision to reserves that they had been required to build phase out nuclear power is fostering endgame up over time to cover the costs of dismantling behavior can be analyzed only (a) conceptually plants and managing nuclear waste.14 In 2016, (by drawing on the public record), (b) empirically a federal government commission set up to (by analyzing the scant data available, that is, the review the financing of the nuclear phaseout frequency of reportable safety events), and (c) issued a final report rejecting this proposal experimentally (by systematically manipulating and instead recommending a division of labor: the impact of simulated phaseout strategies on companies would retain the responsibility and individual decisionmaking). In this article, we unlimited liability for operating, decommis- pursue all three routes. sioning, and dismantling plants and packing radioactive waste, whereas the government would take responsibility for the waste’s inter- Conceptual Observations: mediate storage and for the operation of the The Public Record final repositories.15 In late June 2017, Germany’s Which conditions may undermine nuclear economy ministry and the country’s four utility safety? These days, experts in industrial safety companies formally agreed to that proposal, favor a systems approach to managing risks in and in July 2017 the companies paid €24.1 high-reliability organizations.10–12 They model billion into the newly created “Fund for Nuclear the critical components of risk management Waste Management.” across a hierarchy of levels–from legislation to government agencies, industry associations, In another sign of stress between the utili- utility and plant management, and single-plant ties and the government, in 2014, Germany’s employees. People and organizations at higher biggest utility company, E.ON, announced plans levels impose constraints on the activities of the to split into two companies, one focusing on people and organizations at subordinate levels. nuclear and fossil fuel and the other on renew- Endgame behavior, manifested as a shift toward able energies. According to media reports, self-interested behavior,6 may occur at any of “many observers took E.ON’s decision to hive these levels and wherever the levels interact. off the fossil-fuel and nuclear-generation busi- ness as the creation of a kind of ‘bad utility’—like At the top levels, an impending shutdown may the ‘bad banks’ created to house toxic assets change the interactions between utility compa- after the financial crisis.”16 However, once nies and government agencies, reducing the the German government proposed making companies’ incentives to meet regulatory companies permanently liable for the costs of demands. The public record catalogs several dismantling reactors, E.ON canceled its plans to key events that may be interpreted as signs spin off its German (although not its Swedish) of deterioration in the trust and collabora- nuclear power plants. tive relationships between companies and the government. Furthermore, the German utilities E.ON and RWE and the Swedish utility sued For instance, after a few years in which profits the German government over the legality of from nuclear and fossil fuel power generation the 2011 nuclear phaseout. The case reached slumped,13 in 2014, the utilities proposed that the Federal Constitutional Court (Germany’s

a publication of the behavioral science & policy association 43 agencies, regulators, and utility companies from “endgame behavior could be the German nuclear industry, the RSK recom- mended that these entities should implement manifested as decreasing change-management measures (such as moni- toring, evaluating, and supporting processes efforts by industry to maintain of change) and establish procedures for docu- menting and monitoring the competencies of all the skills and motivation of its employees. workforce” The RSK recommendations were made in response to past developments in the German highest court) in 2016, with the utilities accusing energy supply market and to concerns about the German state of expropriating their atomic the future effects of the phaseout decision on plants without paying compensation.17 In the plants that are still operating. All utilities December 2016, the court mostly rejected have implemented far-reaching cost-cutting their claims, deeming the law for a nuclear measures in response to the 2011 phaseout phaseout “mostly compatible with Germany’s decision. For instance, Areva, one of the constitution.”18 In another lawsuit, though, the largest on-site contractors in the German court ruled in June 2017 that a nuclear fuel tax nuclear power industry, with several thousand imposed on energy utilities in 2011 was uncon- employees, has reduced staff due to a site stitutional, which, in turn, allowed nuclear closure.22 For its part, RWE attempted to nego- utilities to claim billions of euros in refunded tiate with the union to get a 25% wage cut for all taxes. Relatedly, Vattenfall has filed a request for employees in the power generation division,23 arbitration against Germany at the International and E.ON’s nuclear unit has recently announced Centre for Settlement of Investment Disputes. that it will cut at least half of its workforce by According to Germany’s Federal Ministry for 2026.24 Economic Affairs and Energy, Vattenfall is asking for €4.7 billion ($6 billion) in compensation for The utilities’ publicly available financial reports the nuclear shutdown.19 do not detail exactly where costs have been cut. Therefore, the extent to which utilities continue Aside from what media observers describe as to invest in technical system upgrades, contin- a “bruising confrontation”17 between utilities uous training, safety culture initiatives, and and the German government in the courts, on-site contractors is unknown. It is unlikely, endgame behavior could be manifested as however, that new investments in complex decreasing efforts by industry to maintain the technical safety upgrades, which can take years skills and motivation of its workforce and, by to implement, are in the works. By the terms extension, the level of nuclear safety. As early of the 2011 nuclear power phaseout plan, the as 2012, the German Reactor Safety Commis- plant outages that would be required to enable sion (RSK), which gives nuclear safety advice to the installation of safety upgrades would reduce the Federal Ministry for the Environment, Nature plants’ remaining operation times, which would Conservation and Nuclear Safety, published a make safety investments increasingly difficult to memorandum warning of the loss of know-how justify on purely economic grounds.25 Even if and motivation among plant employees.20 investments are still made and jobs are not cut, Specifically, the commission exhorted manage- a relative decline in expertise will be inevitable, ment not to give the workforce the impression because the industry is losing its ability to attract that it is viewed as a somewhat difficult and highly qualified new workers. Indeed, German marginalized group and to offer employees universities have a dearth of new students in ways to continue their careers. At the end of nuclear safety engineering, even though such 2016, the RSK reiterated its concerns from knowledge will be needed to operate the inter- the 2012 memorandum.21 After consulting mediate and final repositories. Relatedly, reports representatives of contractor organizations, indicate that the industry has reduced or ended

44 behavioral science & policy | volume 3 issue 2 2017 its support for nuclear engineering research at power facilities to report all events of “higher universities.26 safety significance”—such as malfunctions, unexpected outages, and incidents known These signs of the utilities’ disengagement— as process safety accidents—to the Incident along with the extensive media coverage Registration Centre of the Federal Office for the of the industry’s financial difficulties and Safety of Nuclear Waste Management.32 pending demise—have no doubt affected plant employees. Although no data are publicly avail- The endgame hypothesis suggests that the able, it seems reasonable to suspect that a frequency of reportable events in German brain drain—the emigration of highly market- nuclear power plants will increase as the shut- able employees—is leaving behind a negatively down date of a plant approaches. Several factors selected group to oversee the plant’s final oper- complicate the analysis of whether this sugges- ation and transition to retirement. Research tion is correct, however. First, there is no firm suggests that job insecurity, as is faced by this theoretical ground for predicting the precise group, is associated with declining safety knowl- moment at which the endgame starts (that is, edge and dwindling motivation to comply with the onset of a potential endgame). Second, €24.1 billion safety policies, which may, in turn, lead to more different players within the same company may Contribution cost to German energy utilities 27 accidents and to injuries in the workplace. experience and perceive the terminal stages for a state fund to store of a dying industry differently. For instance, nuclear waste and Even though the situation in Germany seems the management of a utility is accountable for operate final repositories to make the unraveling of safety standards and all of its plants, and this responsibility extends behaviors more likely than before, a strong beyond the closure of a single plant. In contrast, organizational safety climate could potentially the employees of that plant are immediately attenuate the threat.28 Yet even relatively subtle affected by the utility’s restructuring plans. psychological responses to pending organiza- tional demise can pose a risk. According to a Notwithstanding these difficulties, one way to Increase in average thesis known as the threat-rigidity hypothesis, probe potential endgame effects in German frequency of reportable events at Germany’s individuals and groups tend to behave rigidly nuclear power plants is by contrasting the nuclear plants after the 29 in dying organizations. Rigid behavior—in annual frequencies of reportable events before 2001 shutdown decision terms of less mindful information processing, and after the 2011 phaseout decision. To this less vigilance and attention, unwillingness to end, we determined the average frequency take responsibility and to learn, and work-to- of events occurring five years before and five rule activity—can undermine important safety years after the 2011 decision at the eight plants behaviors (such as mindful and questioning then still operating (using the annual reports behavior),30,31 especially if the organization has from 2006 to 2016 of the Incident Registration a weak safety climate. Centre of the Federal Office for the Safety of Nuclear Waste Management). Contrary to the 234 endgame hypothesis, the average frequencies Number of operating Frequencies of of reportable events for these plants were rela- nuclear reactors Reportable Events worldwide that are tively stable within the five-year period before more than 30 years old Beyond the trends described above, are and after the 2011 decision: the half-year means there quantifiable empirical indications of an were 2.40 and 2.35, respectively (see Figure 1A; endgame dynamic in the German nuclear see also the frequencies of reportable events power industry? Such indicators as near-miss listed separately for individual plants in the reports or management audits of single plants Supplemental Material). are not publicly available and therefore cannot be investigated. We can, however, examine one We wondered whether the pattern was similar important and publicly available indicator of after the 2001 shutdown decision. In that case, nuclear plant safety: the frequency of reportable Chancellor Schröder and representatives of the events. In Germany, the Nuclear Safety Officer German nuclear industry signed an agreement and Reporting Ordinance obliges nuclear to phase out nuclear energy over the next 20

a publication of the behavioral science & policy association 45 years (in what become known as the nuclear is, in any case, no firm theoretical ground for consensus). The agreement became law in predicting the timing of the onset of endgame April 2002. Recall that, in contrast to the 2011 behavior. Also, although the nuclear power phaseout decision, the shutdown dates were legislation did not become law until 2002, the not fixed; plants would be taken off the grid end of nuclear energy generation in Germany when their assigned residual electricity output was already predictable at the time of the 1998 was reached. The termination dates could vary elections, which saw victories by the Green because output allowances could be trans- Party and the Social Democrats. The agree- ferred from one plant to another and because ment between the German government and unplanned and planned outages (such as for the energy companies was reached in 2000 maintenance work or the technical upgrading and endorsed by both parties in 2001. This more of plants) would delay the final shutdowns. It prolonged decision time line, combined with was nonetheless clear that as they approached the different phaseout architectures of the 2001 the allotted electricity output, the shutdown and 2011 plans, also means that one cannot day came closer and the probability of termi- draw any firm conclusions from the 2001 case nation increased. When the probability of about when endgame behavior, as manifested termination increases over time, game theory by higher frequencies of reportable events, is predicts endgame behavior. Although no one likely to start in the nuclear power plants that knows exactly when the termination proba- are operating in Germany today. bility will cross a critical threshold—after which, for instance, safety investments are no longer We can envision a couple of additional reasons paying out—it is likely that at some point, this for the different outcomes. The two phaseout threshold will be reached; therefore, endgame decisions were caused by incommensurable behavior should be expected. events: the Greens and Social Democrats winning the German federal election versus As in the first analysis, we examined the average the Fukushima Daiichi nuclear disaster. The frequencies of reportable events during five- nuclear disaster, unlike the election victory, year windows before and after the 2001 may have caused the nuclear power industry decision (using the annual reports from 1996 to and its employees to be on full alert, even more 2006 obtained from the Incident Registration than usual. Also, the phaseout decisions could Centre of the Federal Office for the Safety of have differed in their influence on the plants’ Nuclear Waste Management). Figure 1B shows reporting thresholds. Plant managers have that during the five years directly after the 2001 some freedom in deciding whether and when decision, the average half-year frequency of an event is reported, and utilities may exploit reportable events of the 17 operational plants this wiggle room to different extents. Because increased by 39%, from 2.79 to 3.87 events (in the 2001 decision allowed plants to extend their an exact two-tailed Wilcoxon signed rank test, operating time if they had production outages, W = 16.5, p = .003). (See note A.) Specifically, the plants may have been more willing to report the number of events increased in 15 of the 17 events and take the time needed to address plants. them. But for today’s plants, any production outages (such as those for events that require In other words, we found an increase in the technical upgrading to fix or a prolonged and annual frequency of reportable events in the deepened root-cause analysis) and associated wake of the 2001 but not the 2011 phaseout financial losses cannot be recouped in the decision. We do not have a clear explanation future. This constraint may result in a higher for the difference, but we can see a number of threshold for what constitutes a reportable possible contributing factors. One is that the event. Admittedly, all these explanations are politics surrounding the 2001 situation makes it speculative. hard to know when the endgame is most likely to have commenced. Perhaps we looked at the Can the different outcomes be better under- wrong time interval. As mentioned earlier, there stood by considering what is happening in

46 behavioral science & policy | volume 3 issue 2 2017 Figure 1. Average frequencies of reportable events (per half year) five years before & after (A) the 2011 phaseout decision (for the eight operating plants) & (B) the 2001 phaseout decision (for the 17 operating plants)

6 A

5

vents per half year 4 table e 3

2

1 verage frequency of repor A 0 1 1 –1 2011–1 2011–2 2012–1 201 5– 2013 2016–1 2014–1 2010–1 2015–2 2013–2 2012–2 2007–1 2014–2 2010–2 2008–1 200 9– 2007–2 2009–2 2006–2 2008–2

Phaseout Decision 2011 6 B

5

4 vents per half year table e 3

2

1 verage frequency of repor A 0 1 1996–2 1997–1 1997–2 1998– 1 1998–2 1999–1 1999–2 2000–1 2000–2 2001–1 2001–2 2002–1 2002–2 2003– 1 2003– 2 200 4– 2004–2 2005–1 2005–2 2006–1

Phaseout Decision 2001

Note. Reportable events meet the German Nuclear Safety Ocer and Reporting Ordinance criteria for higher safety significance, such as malfunctions, unexpected outages, or process safety incidents (Federal Oce for the Safety of Nuclear Waste Management, 2016). Error bars represent an interval of ±1 standard error of the mean, the extent of deviation from the mean.

a publication of the behavioral science & policy association 47 “there is reason to worry that phaseout decisions in a dying high-reliability industry could carry an increased risk of detrimental endgame effects”

other countries? Germany, after all, is not the of detrimental endgame effects. We empha- only country in which nuclear power is being size that the case is not yet strong, however, phased out. Our study of nuclear phaseout poli- and that the specifics of the situations could be cies in other countries, however, has identified important. Some plants contributed more to the only one case that seems comparable with the increase in reportable events than others, for German situation, involving a substantial delay instance (see the Supplemental Material). More- between a political decision and the actual over, the data we examined are not free of noise industrial shutdown: . In 1997, long after and bias. For instance, the date of reporting can a 1980 referendum in which the majority of the deviate from the date of the event, and single Swedish population voted to phase out nuclear plants may have varying reporting thresholds.36 power, the government passed phaseout legis- lation.33 On the basis of this phaseout act, the Swedish government decided that the Barse- Experimental Evidence of bäck 1 reactor would be closed in June 1998, Endgame Effects on Safety- and the Barsebäck 2 reactor would be shut Relevant Investments down in July 2001. After the Swedish supreme Experimental results have successfully informed administrative court rejected an appeal against a wide range of public policy and institutional the decision submitted by the plant’s owner design decisions, such as auctions for electric in June 1999, Barsebäck 1 was permanently power in California37 and the British 3G telecom shut down in November 1999. Barsebäck 2, in licenses auction.38 Against this background, we contrast, was not shut down until May 2005, investigated the potential impact of endgame after repeated postponements of the shut- effects on safety in controlled experimental down date due to a lack of renewable energy studies simulating two phaseout strategies. One to replace its output.34 It is interesting that in strategy simulated a fixed shutdown date (finite 2004, shortly before its closure, Barsebäck 2 horizon condition), which parallels the 2011 reached an all-time peak in production. At the and, to some extent, also the more dynamic same time, reportable events at Barsebäck 2 2001 phaseout scenarios. The other simulated increased from 21 in 2002 to 48 in 2004 (see a constant probability of further operations Figure S3 in the Supplemental Material). Final (indefinite horizon condition). (See the Supple- bursts of productivity have also been reported mental Material for more details on the method, for conventional organizations facing terminal hypotheses, and results.) In games with an shutdown.35 The increase of reportable events indefinite time horizon, after each game period may be consistent with the extended endgame another period follows with some probability so period of Barsebäck 2, at the expense of a that the players do not know how many times usually strong emphasis on safety. This single the games will repeat. In this context, unlike the case, however, defies any general conclusions. situation in finitely repeated games, behavior based on rational self-interest can now coincide To conclude, the data on reportable events with socially desired behavior. As long as there before and after Germany’s phaseout decisions is a substantial probability of future interaction paint a mixed picture. Nevertheless, the find- and the probability of termination is low, people ings for the operational plants after the 2001 are predicted to refrain from exploiting others, decision and for the operational Swedish Barse- and cooperation (or contribution to a public bäck 2 reactor suggest that there is reason to good) can be sustained. Our goal in Study 1 worry that phaseout decisions in a dying high-­ was to examine whether behavior in a scenario reliability industry could carry an increased risk involving safety depends on endgame horizons.

48 behavioral science & policy | volume 3 issue 2 2017 A total of 62 participants acted as managers Figure 2. Proportion of yearly investments targeted of a hypothetical chemical plant. Operation to safety in (A) Study 1 & (B) Study 2 of the plant could result—with a probability of 5%—in a very costly accident. To avoid this acci- A dent, managers could invest in safety measures 0.8 that kept the accident probability constant but carried costs. Alternatively, they could decide against investing in safety, thus incur- 0.6 ring no costs, but the probability of an accident increased. 0.4 To examine the impact of a finite compared with an indefinite time horizon, we had half the managers make decisions knowing that 0.2 the plant would be closed in 10 experimental years. For the other half, no definite closing time Indefinite horizon condition was specified. The game-theoretical predic- Mean proportion of safety investments Finite horizon condition tions for the two time horizons are clear: In 0.0 the finite horizon condition, there is a conflict 12345678910 between payoff maximization and safety invest- Year ment; optimal payoff-maximizing behavior involves no investments after the third period 0.8 B of the game. In the indefinite horizon condi- tion, safety investments are always the optimal and payoff-maximizing decision. (For additional 0.6 details, see the Supplemental Material.)

The rationale behind these predictions is rela- tively simple: Investments in safety keep the 0.4 probability of future accidents low, but when the future is limited—as in the finite horizon condition—keeping the probability of an acci- 0.2 Indefinite horizon condition dent low does not pay off. In contrast, because Finite horizon condition Indefinite horizon social condition of the uncertainty about the length of the

Mean proportion of safety investments Finite horizon social condition game in the indefinite horizon condition, 0.0 the expected value of safety investments is always positive, making safety investment the 12345678910 payoff-maximizing choice. In both conditions, Year managers’ investment choices largely followed Note. The mean proportion of safety investments is the average number of investment choices the expected logic. As shown in Figure 2A, in intended to increase safety when compared with all decisions. Smaller proportions signify the finite horizon condition, safety invest- lower commitments to safety. Error bars represent an interval of ±1 standard error of the mean. ments—as measured by the proportion of decisions intended to increase safety compared the same experimental paradigm and horizon to all decisions—declined markedly as the shut- manipulation but in addition tested whether down of the plant approached. In the indefinite imposing collective consequences for choosing horizon condition, in contrast, the investments not to invest in safety would alter behavior. increased from the first to the sixth periods (56% Omitting safety investments not only affects versus 71%) and then remained constant. people’s own outcomes but can also have negative consequences for other people. We We tested the robustness of Study 1’s findings reasoned, therefore, that people with other-­ in a second study. In Study 2, we implemented regarding social preferences might be motivated

a publication of the behavioral science & policy association 49 to choose the safety investment to avoid nega- Discussion & Conclusion tive consequences for others. Our goal was to conceptually, empirically, and experimentally explore the possibility that the In Study 2, a total of 427 participants were phaseout policies of the German government assigned to one of four experimental condi- are having unintended consequences for the tions. There were two social groups and two safety of the country’s nuclear power industry. nonsocial groups, each with a finite or an indef- Phaseout policies in Germany were put in place inite horizon. We analyzed the behavior of only to increase public safety and, in the case of the the 115 participants who demonstrated an 2011 decision, to respond to the shift in public understanding of the game by passing a knowl- risk perception after Fukushima.39,40 edge test about it and who had not participated in more than 20 online surveys in the past Our analyses highlight in different ways the month. Participants in the two social groups potential risk of endgame behavior during the were informed that they would be randomly and phaseout window of a dying industry. First, anonymously grouped with three other partic- drawing on the public record, we chronicled ipants in the experiment. If any member of that the increasingly adversarial dynamics between group was responsible for an accident’s occur- the state and industry players tasked with main- rence, the other three group members would taining high levels of safety in German nuclear also incur costs. power plants. Second, the analysis of reportable events after two phaseout decisions revealed As Figure 2B shows, the findings of Study 1 were mixed evidence for endgame behavior on the replicated, with declining proportions of safety plant level. On the one hand, we found no investments in the finite but not the indefinite increase of reportable events during the five horizon condition. We had expected that partic- years after the 2011 decision compared with ipants in the social conditions would choose the the five years before. On the other hand, we safety investment option more often than would found significantly higher average frequencies those in the corresponding nonsocial condi- of reportable events during the five years after tions, but we were wrong. The safety investment the 2001 decision than during the five years results did not differ substantially between the before the decision. Additionally, we found an social and nonsocial conditions, and collective increase in reportable events at the Barsebäck 2 consequences did not prevent the observed reactor in Sweden shortly before its final shut- endgame effect in the finite horizon condition. down. Third, the results of our two experimental studies show that endgame behavior occurs at In both studies, participants did not strictly the level of individual players in a finite-horizon follow the predictions of game theory: Those in scenario, even in scenarios where low safety the finite horizon condition did not completely investments can lead to negative consequences stop investing in safety, and participants in the for other players. indefinite horizon condition did not always invest in safety. Nevertheless, the combined results Let us clearly emphasize that we have found demonstrate that a finite horizon triggered a mixed results and could not help but rely on declining investment in safety. An indefinite small sample sizes for the plants’ reportable horizon, in contrast, resulted in a constant level events. Therefore, our conclusions are neither of investments. Following the convention of clear-cut nor very strong. Moreover, we were experimental economics, players’ outcomes not able to reveal the reasons for the inconsis- depended on the other players’ behavior in the tent findings. We tried repeatedly, persistently, social condition of the game, thus constituting and through various channels—but ultimately a social interaction. It is, of course, conceivable unsuccessfully—to get additional data about the that with additional face-to-face communica- plants, such as reports of near misses related to tion among players, the behavior could have safety, data on personnel turnover, and statistics turned out differently and might have led to on occupational accidents or sick leave of plant more decisions to invest in safety than we saw. personnel. In line with the abovementioned

50 behavioral science & policy | volume 3 issue 2 2017 recommendations of the RSK, we advocate for more transparency about these and other “endgame behavior figures that could help to indicate whether managers and employees of nuclear power manifested as a shift toward plants are slipping into endgame behavior. self-interested behavior can In light of the potentially disastrous conse- quences of declining safety in nuclear power occur across a hierarchy of plants, we believe that our analysis of the respective phaseout policies is important levels” enough to warrant attention from policy- makers, utilities, and the public. Even if the to the industry trying to absolve itself from any empirical evidence we provide is limited and midterm or long-term liability for plants and mixed, the theoretical argument that endgame radioactive waste. These dynamics are intensi- effects should be taken into account when fied by developments that are likely in a phaseout creating phaseout policies appears important. period even without endgame behavior, such as For example, according to the German Atomic difficulties in recruiting new talent and retaining Energy Act (section 19a, paragraph 2), a plant skilled staff at all levels (operators, regulators, is required to undergo a comprehensive safety technical support workers, and suppliers). review every 10 years, unless the plant is to be taken off the grid within the three years What are the possible responses to these risks? that follow what would be the next scheduled One strategy to reduce the risk of noncooper- review.41 This means, for instance, that for the ative endgame behavior related to safety would three plants that are scheduled to be shut down be to not give employees advance notification in 2022, the final comprehensive safety review of a plant’s shutdown.42 The results of the exper- occurred in 2009. One may question whether imental studies suggest that endgame behavior the waiver of an encompassing safety review is is less likely to occur when the game has an a wise decision in view of the potential endgame indefinite time horizon. As long as the shut- problems we have outlined; perhaps some down date is not known and unlikely to occur version of the review should still be done. We, soon, endgame behavior should be less likely. of course, hope that our concerns prove to be Yet this strategy would be highly paternalistic overly pessimistic. Nevertheless, we feel that an and unfair to the employees and would be diffi- awareness of the risks embodied by endgame cult to implement in an industry that faces strict problems should intensify all stakeholders’ and transparent termination dates. It would also efforts to prevent such an outcome—not only pay little attention to the Swedish experience, in Germany but also in other countries (such as which has highlighted the importance to safe Belgium and Switzerland) that have announced operations of having transparent communica- plans to phase out nuclear power. tion within the organization complemented by a monitoring system that attends to workers’ The risks of endgame behavior deserve poli- psychological well-being (the “feeling of the cymakers’ attention because numerous factors workers”).43 may collude to amplify its potential impact. First, endgame behavior manifested as a shift A possible response to the industry’s difficulties toward self-interested behavior can occur in recruiting new talent would be to establish across a hierarchy of levels, affecting the deci- innovative engineering programs focusing on sions of industry and policymakers, managers, the decommissioning and dismantling of aging and employees. The manifestation of endgame nuclear power plants. Given that 234 operating behavior is thus likely to be multidimensional— reactors worldwide are more than 30 years from employees showing increasingly rigid old and, of those, 64 are more than 40 years behavior, to the media vilifying employees of a old,44 there will be a fast-growing demand for dying industry (a risk highlighted by the RSK),21 this new and sophisticated expertise. Relatedly,

a publication of the behavioral science & policy association 51 the RSK has recommended implementing author affiliations strategic competence management: a reper- toire of measures with the goal of monitoring, Schöbel: University of Basel. Hertwig: Max maintaining, and further developing safety-­ Planck Institute for Human Development. relevant competences among employees in the Rieskamp: University of Basel. Corresponding nuclear power industry.21 This approach also author’s e-mail: [email protected]. includes adopting measures (such as additional professional training and financial incentives) author note to counteract the ongoing loss of compe- tence by fostering employees’ commitment to All authors contributed equally to the conduct their companies. At the same time, strategic of the experiments and the writing of the manu- competence management might also mean script. We greatly appreciate the comments of offering professional development and training Michael Baram and John S. Carroll on a previous in transferable skills to those employees who version of the article. We thank Susannah Goss will inevitably have to transition to new careers and Laura Wiles for editing the manuscript and in other industries, and perhaps even providing Gilles Dutilh for preparing the figures. We also rewards for enrolling in the training. thank the Swedish Radiation Safety Authority for providing data on reported incidents in Swedish Finally, on the level of public policymaking, deci- nuclear reactors. sionmakers need to recognize the challenge of designing and implementing phaseout policies supplemental material that minimize the risk of endgame behavior. • https://behavioralpolicy.org/publications/ For instance, the Federal Council of Switzer- land and the Swiss Parliament have decided to • Methods & Analysis phase out nuclear energy gradually. Specifically, nuclear power plants will not be replaced once their operating lifetimes end. However, they endnote can remain operational within their operating A. From the editors to nonscientists: For any given lifetime as long as their safety is guaranteed, data set, the statistical test used depends on the that is, as long as a plant meets the statutory number of data points and the type of measure- safety requirements. Such a phaseout policy ment being used, such as proportions or means. provides a strong financial incentive to maintain The p value of a statistical test is the probability of obtaining a result equal to or more extreme than and invest in high levels of safety and may thus would be observed merely by chance, assuming be a more suitable way of keeping the risks of there are no true differences between groups endgame behavior to a minimum—at least as under study (the null hypothesis). Researchers long as some uncertainty remains regarding the traditionally view p < .05 as statistically signifi- onset of the decommissioning process. cant, with lower values indicating a stronger basis for rejecting the null hypothesis. The W score is the minimum of the sum of positive or negative signed ranks; the smaller its value (with a minimum of 0), the less likely it is that the result occurred by chance (assuming the null hypothesis).

52 behavioral science & policy | volume 3 issue 2 2017 references

1. Federal Ministry for the Environment, Times. Retrieved from http://www. 21. Reactor Safety Commission. (2016, Nature Conservation and Nuclear Safety. nytimes.com/2014/09/14/science/ November 3). Monitoring von (2002, February 1). Atomausstiegsgesetz earth/sun-and-wind-alter-german- Know-how- und Motivationsverlust und nimmt letzte Hürde [Nuclear phase-out landscape-leaving-utilities-behind. geeignete Maßnahmen zur Stärkung law takes the last hurdle; press release]. html?_r=0 von Motivation und Know-how-Erhalt Retrieved from http://www.bmub.bund. 14. Dohmen, F., & Hawranek, D. (2014, in der deutschen Kernenergiebranche de/presse/pressemitteilungen/pm/ May 15). Bad banks for nuclear plants: [Monitoring of loss of know-how and artikel/atomausstiegsgesetz-nimmt- Utilities look to German taxpayers. motivation and suitable measures letzte-huerde/ Spiegel Online. Retrieved from http:// for strengthening motivation and 2. Federal Office for the Safety of Nuclear www.spiegel.de/international/germany/ preserving know-how in German Waste Management. (2017). Laufzeiten utility-companies-want-public- nuclear power industries; statement]. deutscher Kernkraftwerke [Operating trust-for-winding-down-nuclear- Retrieved from http://www.rskonline. times of German nuclear power plants]. plants-a-969707.html de/sites/default/files/reports/ epanlage1rsk488hp_0.pdf Retrieved from https://www.bfe. 15. Commission to Review the Financing bund.de/DE/kt/kta-deutschland/kkw/ for the Phase-out of Nuclear Energy. 22. Schönberger, A. (2017, January 31). laufzeiten/laufzeiten.html (2016). Responsibility, safety and Areva ist Geschichte [Areva is history]. 3. von Neumann, J., & Morgenstern, O. certainty—A new consensus on nuclear Frankfurter Rundschau. Retrieved from (1944). Theory of games and economic waste disposal: Final report of the http://www.fr.de/rhein-main/offenbach- behavior. Princeton, NJ: Princeton Commission to Review the Financing areva-ist-geschichte-a-743791 University Press. for the Phase-out of Nuclear Energy. 23. Kein Ergebnis: Gespräche über 4. Fudenberg, D., & Tirole, J. (1991). Game Retrieved from https://www.bmwi.de/ Lohnkürzung bei RWE [No result: theory. Cambridge, MA: MIT Press. Redaktion/EN/Downloads/bericht- Talks on wage cuts at RWE]. (2016, expertenkommission-kernenergie. June 15). Kölnische Rundschau. 5. Auman, R. J., & Maschler, R. (1995). pdf?__blob=publicationFile&v=2 Retrieved from http://www. Repeated games with incomplete rundschau-online.de/wirtschaft/ information. Cambridge, MA: MIT Press. 16. E.ON and E.OUT: A German power- producer is breaking itself up to kein-ergebnis-gespraeche-ueber- 6. Selten, R., & Stoecker, R. (1986). face the future. (2014, December lohnkuerzung-bei-rwe-24232346 End behaviour in sequences 4). The Economist. Retrieved from 24. E.ON’s nuclear unit to cut at of finite prisoner’s dilemma http://www.economist.com/news/ least half its workforce by 2026. supergames: A learning theory business/21635503-german-power- (2017, July 12). Retrieved from approach. Journal of Economic producer-breaking-itself-up-face- https://uk.reuters.com/article/ Behavior & Organization, 7, 47–70. future-eon-and-eout eon-nuclear-jobs-idUKL8N1K31YL doi:10.1016/0167-2681(86)90021-1 17. Chazan, G. (2016, March 15). Eon and 25. Dehmer, D. (2016, March 7). Wie sicher 7. Roth, A. E., & Murnighan, J. K. (1978). RWE sue German government over ist der Atomausstieg? [How safe is the Equilibrium behavior and repeated play nuclear shutdown. Financial Times. nuclear phase-out?]. Der Tagesspiegel. of the prisoner’s dilemma. Journal of Retrieved from http://www.ft.com/ Retrieved from http://www.tagesspiegel. Mathematical Psychology, 17, 189–198. cms/s/0/df44d1ee-e792-11e5-bc31- de/politik/atomkraftwerke-wie-sicher- doi:10.1016/0022-2496(78)90030-5 138df2ae9ee6.html#axzz4IQTrXd9s ist-der-atomausstieg-/13061456.html 8. Andreoni, J. (1988). Why free ride? 18. Rueter, G. (2016, December 6). Opinion: 26. Sommer, S. (2016, August 3). Strategies and learning in public Limiting the greed of the nuclear Kerntechniker in der Klemme goods experiments. Journal of industry. Retrieved from Deutsche [Nuclear engineers under pressure]. Public Economics, 37, 291–304. Welle website: http://www.dw.com/ Frankfurter Allgemeine Zeitung. doi:10.1016/0047-2727(88)90043-6 en/opinion-limiting-the-greed-of-the- Retrieved from http://www.faz.net/ 9. Fehr, E., & Gächter, S. (2002, nuclear-industry/a-36664176 aktuell/beruf-chance/campus/macht- January 10). Altruistic punishment 19. Hellemans, A. (2014, November der-atomausstieg-ein-kernenergie- in humans. Nature, 415, 137–140. 12). Vattenfall seeks $6 billion studium-ueberfluessig-14362056.html doi:10.1038/415137a in compensation for German 27. Probst, T. M., & Brubaker, T. L. 10. Rasmussen, J. (1997). Risk management nuclear phase-out. IEEE Spectrum. (2001). The effects of job insecurity in a dynamic society: A modeling Retrieved from http://spectrum.ieee. on employee safety outcomes: problem. Safety Science, 27, 183–213. org/energywise/energy/nuclear/ Cross-sectional and longitudinal doi:10.1016/s0925-7535(97)00052-0 swedish-energy-giant-vattenfall-nets- explorations. Journal of Occupational billions-for-nuclear-phaseout Health Psychology, 6, 139–159. 11. Leveson, N. (2004). A new accident doi:10.1037/1076-8998.6.2.139 model for engineering safer systems. 20. Reactor Safety Commission. (2012, Safety Science, 42, 237–270. July 12). Drohende Gefährdung der 28. Probst, T. M. (2004). Safety and doi:10.1016/s0925-7535(03)00047-x kerntechnischen Sicherheit durch insecurity: Exploring the moderating Know-How- und Motivationsverlust effect of organizational safety 12. Leveson, N. (2011). Applying systems [Potential threats to nuclear safety climate. Journal of Occupational thinking to analyze and learn from through loss of know-how and Health Psychology, 9, 3–10. events. Safety Science, 49, 55–64. motivation; memorandum]. Retrieved doi:10.1037/1076-8998.9.1.3 doi:10.1016/j.ssci.2009.12.021 from http://www.rskonline.de/sites/ 13. Gillis, J. (2014, September 13). Sun default/files/reports/epanlagersk449hp. and wind alter global landscape, pdf leaving utilities behind. The New York

a publication of the behavioral science & policy association 53 29. Sutton, R. I. (1987). The process of 41. Federal Ministry for the Environment, organizational death: Disbanding Nature Conservation, Building and and reconnecting. Administrative Nuclear Safety. (2016). Convention Science Quarterly, 32, 542–569. on Nuclear Safety: Report by doi:10.2307/2392883 the Government of the Federal 30. Weick, K., & Sutcliffe, K. (2001). Republic of Germany for the Managing the unexpected: Assuring Seventh Review Meeting in March/ high performance in an age of April 2017. Retrieved from https:// complexity. San Fransisco, CA: doris.bfs.de/jspui/bitstream/ Jossey-Bass. urn:nbn:de:0221-2016100614132/1/ CNS_Bericht_2017_en_bf.pdf 31. International Nuclear Advisory Group. (1991). Safety culture (Safety Series 42. Folger, R. (1993). Reactions to No. 75-INSAG-4). Vienna, Austria: mistreatment at work. In J. K. Murnighan International Atomic Energy Agency. (Ed.), Social psychology in organizations: Advances in theory and research (pp. 32. Federal Office for the Safety of Nuclear 161–183). Englewood Cliffs, NJ: Prentice Waste Management. (2016). Reporting Hall. procedure. Retrieved from http://www. bfe.bund.de/EN/ns/events/reporting- 43. International Atomic Energy Agency. procedure/reporting-procedure_node. (2003). Managing the early termination html of operation of nuclear power plants (Safety Reports Series No. 31). Vienna, 33. Ministry of the Environment. (1998). Austria: Author. Sweden’s first national report under the convention on nuclear safety: Swedish 44. Schneider, M., & Froggatt, A. (2017). implementation of the obligations of World Nuclear Industry Status the convention (Ds 1998:54). Retrieved Report 2017. Mycle Schneider from http://www.regeringen.se/49c6b3/ Consulting. Retrieved from https:// contentassets/625f71ce5da644549 www.worldnuclearreport.org/IMG/ 043ffe124e44590convention-on- pdf/20170912wnisr2017-en-lr.pdf nuclear-safety-ds-1998-54.pdf 34. Wiwen-Nilsson, T. (2006). Phasing-out of . Journal of Energy & Natural Resources Law, 24, 355–361. doi:10.1080/02646811.2006. 11433441 35. Hansson, M., & Wigblad, R. (2006). Pyrrhic victories—Anticipating the closedown effect. The International Journal of Human Resource Management, 17, 938–958. doi:10.1080/09585190600641255 36. Carroll, J. S. (1998). Organizational learning activities in high- hazard industries: The logics underlying self-analysis. Journal of Management Studies, 35, 699–717. doi:10.1111/1467-6486.00116 37. Plott, C. R., & Smith, V. L. (2008). Handbook of experimental economics results (Vol. 1). Amsterdam, the Netherlands: Elsevier. 38. Binmore, K., & Klemperer, P. (2002). The biggest auction ever: The sale of the British 3G telecom licenses. The Economic Journal, 112(478), C74–C96. doi:10.1111/1468-0297.00020 39. Slovic, P. (1987, April 17). Perception of risk. Science, 236, 280–285. doi:10.1126/science.3563507 40. Roeser, S. (2011). Nuclear energy, risk, and emotions. Philosophy & Technology, 24, 197–201. doi:10.1007/ s13347-011-0027-6

54 behavioral science & policy | volume 3 issue 2 2017