Suppose there are two firms, Pfizer, and AstraZeneca racing to bring out a vaccine for virus X. Each firm wants to bring out the vaccine quickly, however bringing out the vaccine quickly carries some risk that the vaccine will not be effective. The chance that the vaccines is ineffective is I=1-m/12, where m is the month in which the vaccine is released. The market for the vaccine is $130 million, and this goes to the firm that enters the market first (even if their vaccine is ineffective). If they both enter the market at the same time then the $130 million is split 50-50. However, if the vaccine is ineffective then the firm has to pay a fine to the government of $240 million dollars. Assume that Pfizer moves first and at 6 months decides whether to release the vaccine or not. AstraZeneca decides at 7 months, Pfizer at 8 months, and so on until at 12 months both release the vaccine simultaneously. 2 a) [2 marks] Assume that firms are risk neutral in profits, draw the game tree for this game. b) [2 marks] Find the subgame perfect equilibri a. Suppose there are two firms, Pfizer, and AstraZeneca racing to bring out a vaccine for virus X. Each firm wants to bring out the vaccine quickly, however bringing out the vaccine quickly carries some risk that the vaccine will not be effective. The chance that the vaccines is ineffective is I=1-m/12, where m is the month in which the vaccine is released. The market for the vaccine is $130 million, and this goes to the firm that enters the market first (even if their vaccine is ineffective). If they both enter the market at the same time then the $130 million is split 50-50. However, if the vaccine is ineffective then the firm has to pay a fine to the government of $240 million dollars. Assume that Pfizer moves first and at 6 months decides whether to release the vaccine or not. AstraZeneca decides at 7 months, Pfizer at 8 months, and so on until at 12 months both release the vaccine simultaneously. 2 a) [2 marks] Assume that firms are risk neutral in profits, draw the game tree for this game. b) [2 marks] Find the subgame perfect equilibri a