2. Suppose there are two firms in the market for computer processors.Intel is considering developing a new technology that would reduce the costs of production.The development of this technology would cost Intel a fixed cost of C.If Intel develops the technology, AMD can adopt it for a smaller cost of C/2.If Intel innovates and AMD does not, then Intel will earn $20 in revenue and AMD will earn $0.If they both adopt the technology, they will each earn $15 in revenue.If neither firm uses the new technology, they each earn $5 in revenue.

a. Draw the sequential form of this game.

b. For what range of possible set-up costs (C) will AMD have an incentive to adopt the technology if Intel innovates?

c. For what range of possible set-up costs (C) will Intel develop this technology?

d. If C=15, what is the subgame perfect equilibrium of this game?