Consider the following scenarios. Wealthy nations can adopt two strategies in this situation. One, using self-regarding preferences, where they sit back and not consider sharing (i.e. hoarding) the vaccine with poor countries. Two, using other-regarding preferences, take the lead and share the vaccine with poor countries and fund organisations such as COVAX.

There are 2 tasks to do for part (A). For both tasks, you are required to construct only one (1) relevant payoff matrix, using numbers in each quadrant. Work out what the associated numerical (hypothetical) payoffs are. Explain in words each quadrant and any specific outcome(s) you come across.

Task 1: Assume the players have self-regarding preferences. Explain how the hoarding of vaccines by rich countries can lead to sub-optimal outcomes for the world and its implications for the world.

Task 2: Refer to the same payoff matrix with numbers from task one. Now assume the players have other-regarding preferences. Explain how this will lead to optimal outcomes for the world, including the two participant wealthy nations. Consider the role of fairness in this type of scenario.

STEPS:

To helpyouconstructthe payoffmatrix for a global game,here arethe key parameters:

• Thereare twoplayers-player'a'wealthy nation (A), andplayer'b' wealthy nation (B). Thereare twostrategies -contribute vaccinesor not contributevaccines.
• Eachstrategyhasanassociatedpayoff.
• This is a simultaneously played game, where the players are taking actions at the same time.
• In your answers, refer to key concepts relevant from L1 and L2 such as free-riding, fairness, coordination game, cooperation game, nash equilibrium (equilibria) and so on.