Question
During the pandemic, stockpiling behavior have been criticized in the newspapers and described as irrational. From a game theory perspective, stockpiling of toilet paper can
During the pandemic, stockpiling behavior have been criticized in the newspapers and described as irrational. From a game theory perspective, stockpiling of toilet paper can be modeled as astrategic game. Let's assume that we have two players who can choose between option 1: running to buy toilet paper (stockpiling behavior); and option 2: waiting to buy toilet paper. They believe that there is a risk that supermarket will run out of stock. The following matrix gives the payoffs of each choice, where in each cell, the first number is the payoff of player A and the second number is the payoff of player B.
Player B
Wait to buy
Run to buy
Player A
Wait to buy
3, 3
1,4
Run to buy
4,1
2,2
a.Explain the strategic interactions behind the stockpiling behavior .
b.Find the equilibrium by elimination of dominated strategies (answer in 70-130 words).
Does individual rationality lead to a socially desirable outcome? Why? (answer in 70-130 words
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