Game Theory, Cooperation and Survival

Suppose that we had a city with an area of five miles by five miles. Let us further suppose that this city had a population of 100,000 residents. Let us yet further suppose that the area was divided equally among the residents, that all were capable and each were allocated 90ft by 90 ft. on each side (except for the outer edges), they would be bounded on four sides by another person/block and at each diagonal, for a total of eight people. They could do anything they needed, and had access to all the resources within the prescribed area, but they could not leave their block.They could only pass materials across a border or a diagonal.

How would they cooperate to maximize their potential? What would happen if they could leave their block, but not city bounds? How would they deal with waste? How would they deal with a shortfall of a crucial element (such as palladium, used in electronics)? How would they self organize over time? Discuss.