1.)Consider the competition between pharmaceutical companiesPfizer Inc.andBayer AGto develop a COVID vaccine. SupposePfizer Inc.is ahead in the development process andBayer AGis considering whether to enter the competition. IfBayer AGstays out, it earns 0 in profits, whereasPfizer Inc.enjoys a monopoly and earns a profit of $3 billion. IfBayer AGdecides to enter and develop a vaccine, thenPfizer Inc.must decide whether to accommodateBayer AGpeaceably or to wage a price war. In the event of peaceful competition,Pfizer Inc.andBayer AGwill make a profit of $1 billion and $800 million, respectively. If there is a price war, thenPfizer Inc.will lose $100 million andBayer AGwill lose $300 million because the prices of the vaccine will fall so low that neither firm will be able to recoup its research and development costs.

Draw the tree for this game. Do not forget to label players, write strategies and payoffs.

Present this game in strategic form.

2.)Write down the extensive form for a setting in which Edmond (player 1) moves first by choosing among three actions:X, Y,andZ. After observing the choice of Edmond, Fernand (player 2) chooses among two actions:AandB. If Edmond chosesX, then Danglars (player 3) selects among two actions:YYandZZ. Danglars does not know Fernand's choice when he moves (You can ignore payoffs in this game).