Q. 1. You must decide whether or not to introduce a new product. If you launch the fresh product, your competitor will have to decide whether or not to clone the new product. If you do not initiate the new product, you and your rival will earn $1 million each. If you introduce the new product and your rival clones it, you will lose $5 million and your rival will earn $20 million. If you introduce the new product and your rival does not clone, you will make $100 million and your rival will make $0.
a. Set up the extensive form of this game.
b. Should you introduce the new product?
c. How would your answer change if your rival has "promised" not to clone your product?
d. What would you do if patent law prevented your rival from cloning your product?