Steps of the game: 1. Bernie and Sarah negotiate two prices, a baseline price 190 E R+, and a price for exercising the option to buy an artwork that Sarah would produce, 131 E Rh. 2. Sarah observes the outcome of the negotiation in step 1. Then she chooses a quality level q E 11%. 3. If they failed to reach an agreement in step 1, then no money changes hands and Sarah keeps the artwork, But if they did manage to reach an agreement,. . . 4. Bernie observes q and decides whether to exercise his option to buy. If the parties agree in step 1, and then Bernie does exercise his option to buy, then the payos are: UB=4\\/6_P0P17 Us=P1+P0-I~ If the parties agree in step 1, but then Bernie does not exercise his option to buy, then Bernie still has to pay 390, but Sarah now keeps the artwork. The payo's are: UB=Poa U3=P0+2\\/Q- If parties do not reach an agreement in step 1, then the payos are: 113:0, uS=2\\/q. Questions a) Draw the game tree b) Is there an environment of full veriability in this game? Why or why not?No, quality is not contractible. 0) Consider the socially efcient (joint value maximising) outcome. Would Bernie exercise the option to buy the artwork in this outcome? What quality level would Sarah choose in this outcome?Yes he does; q = 4 d) Write down a condition for the contract under which Bernie actually exercise the option (ie. under which it would be sequentially rational for him to do sowg