1'0. 23 and Omicron are companies in the IT services industry. They are currently in a patent race for a new software system to handle logistics and each one of them needs to pick one of two research approaches. The first approach (Al), is fully deterministic and it will take 3 years to complete. The second one, (A2) is probabilistic and it has a probability of 70% to complete in 16 months and a probability of 30% to fail completely. A2 is statistically independent, i.e. if both companies select it, then the outcome for each company is independent of the outcome for the other. Moreover, if one company achieves the innovation before tlpe other then it will enjoy the advantage of being a monopolist for some period of time and it will generate expected profit of 18 bn. The other company gets _ nothing in this case. Finally, if the two companies complete the innovation at the same time, they will have to share the market and, due to price competition, each one will generate . expected prot of 7 bn. I 3. Suppose that 23 select A1. Which approach does Omicron prefer to take? (5 points) b. Find what is the likely outcome of its patent race in terms of selected approaches from the two companies. (10 points)