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5:08 < ECON1020 2022 Exa... Q [SECTION 3: next pagel 3/4 MACQUARIE BUSINESS SCHOOL Final ECON1020 PRINCIPLES OF ECONOMICS 1 | Sl 2022 Department of Economics SECTION 3 (20 MARKS) Question 7 [Max 200 words, 6 marks] 51 MACQUARIE University Recall the time when the number of COVID-19 cases was surging and the first lockdown had just been announced. You are running low on toilet paper, but would only need a few rolls to get through a short lockdown. Then you come across the news of people panic buying in the neighbourhood. Below are two matrices describing the hypothetical payoffs for two players, "You" and "Other Shoppers" who are solely self-interested, and the resulting social outcomes in what we will call the "Toilet Paper Game". Assume that this game is a simultaneous one-shot game. Other Shoppers Other Shoppers o Don't Hoard 12 12 24 24 2 2 8 Don t Hoard Sufficient toilet paper for everyone to get through You have an abundance of toilet paper, but other miss Hoard You miss out on toilet paper. but other shoppers have an abundance Toilet paper shortages most people do not have enough to get through Find the Nash equilibrium(s) of this game. Provide your reasoning by referring to the payoff matrix above. Your reasoning must include the best responses of each firm. Question 8 [Max 200 words, 6 marks) Keep considering the same game and the payoff matrix from the previous question. Discuss whether this game is an invisible hand game. Your discussion must start by explaining what an invisible hand game is. Question 9 [Max 200 words, 8 marks] Keep considering the same game and the payoff matrix from Question 7. In addition, assume that the two players, "You" and "Other Shoppers" are self-interested, but also have social preferences such as inequality aversion and reciprocity. Discuss how this change in assumption affects the predicted outcome of this game. [End of Final Exam Part 21 4/4