Part (a) - 20 Marks. 20 marks for the graphical and written analysis. (There is no word limit for part a).

COVID-19 and vaccine: Wealthy nations vs. poor nations

Read the following key article and browse the WHO website using the link below to understand COVAX:

"Incentivising wealthy nations to participate in the COVID-19 Vaccine Global Access Facility (COVAX): a game theory perspective" https://gh.bmj.com/content/bmjgh/5/11/e003627.full.pdf

"COVAX - working for global equitable access to COVID-19 vaccines"

https://www.who.int/initiatives/act-accelerator/covax

There are 2 tasks to do for part (a).

For both tasks, you are required to construct only two (2) relevant payoff matrices.

Firstly, construct a payoff matrix using words, describing each quadrant.

Secondly, from that matrix, work on a payoff matrix using numbers in each quadrant and explain.

In this game, there should be two Nash Equilibria.

In both tasks, you are to explain the outcomes of the game.

Task 1: Assume the players have self-regarding preferences. Explain how the bilateral purchase agreements made by rich nations, based on their self-interest, can lead to sub-optimal outcomes for the world, such as limited vaccination coverage globally.

Task 2: Using the same matrix, now assume the players have other-regarding preferences. Explain how the bilateral purchase agreements made by rich nations, based on their other-regarding preferences and their participation in COVAX, can lead to optimal outcomes for the world, such as greater vaccination coverage globally.

STEPS:

To help you construct the payoff matrix for a global game, here are the key parameters:

There are two players - player 'a' wealthy nation (A), and player 'b' wealthy nation (B).

There are two strategies - participate in COVAX or not participate in COVAX.

Each strategy has an associated payoff.

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, coordination game, public goods, and so on.