Apply the productivity effect, the sunk cost effect, the replacement effect, and the efficiency effect to a hypothetical situationusing the table below.

IQ, Inc., currently monopolizes the market for a certain type of microprocessor: the 666. The present value of the stream of monopoly profits from this design is thought to be $500 million. Enginola (which is currently in a completely different segment of the microprocessor market from this one) and IQ are contemplating spending money to develop a superior design that will make the 666 completely obsolete. Whoever develops the design first gets the entire market. The present value of the stream of monopoly profit from the superior design is expected to be $150 million greater than the present value of the profit from the 666. Success in developing the design is not certain, but the probability of a firm's success is directly linked to the amount of money it spends on the project (more spending on this project, greater probability of success). Moreover, the productiv- ity of Enginola's spending on this project and IQ's spending are exactly the same: Starting from any given level of spending, an additional $1 spent by Enginola has exactly the same impact on its probability of winning. The following table illus- trates this. It shows the probability of winning the race if each firm's spending equals 0, $100 million, and $200 million. The first number represents Enginola's probability of winning the race, the second is IQ's probability of winning, and the third is the probability that neither succeeds(Besanko et al., 2017).