Tanzanite is one of the world's rarest gemstones, said to only be found in Tanzania. Assume GemT and RareS are the only 2 firms in the world selling Tanzanite gemstones. Hence, they both hold large market shares in the market for Tanzanite. Answer the following questions: a. Could the two firms earn economic profits in the Tanzanite gemstone market? No. b. As a new year is approaching, GemT and RareS are deciding whether to launch a new collection of Tanzanite gemstones. Launching a new collection will bring in higher revenue but will also incur large marketing and design costs. GemT's payoff will also be affected by Rares' decision to launch a new collection and vice versa. The payoff values (in millions of dollars) below represent the expected first- year economic profits from each strategy. What will the resulting first-year payoff be for GemT (left side of the table player) after playing the game with RareS (top of the table player)? $ Answer in millions of dollars (i.e. a value shown in the table, with no decimal places, $ sign, spaces or commas). Launch Does not launch c. What is the dominant strategy for GemT? dominant strategy. Type Y for Yes or N for Launch 13, 13 3,76 Does not launch 84,4 22, 27 Type L for Launch, X for Does not launch or N for No
Tanzanite is one of the world's rarest gemstones, said to only be found in Tanzania. Assume GemT and RareS are the only 2 firms in the world selling Tanzanite gemstones. Hence, they both hold large market shares in the market for Tanzanite. Answer the following questions: a. Could the two firms earn economic profits in the Tanzanite gemstone market? No. b. As a new year is approaching, GemT and RareS are deciding whether to launch a new collection of Tanzanite gemstones. Launching a new collection will bring in higher revenue but will also incur large marketing and design costs. GemT's payoff will also be affected by Rares' decision to launch a new collection and vice versa. The payoff values (in millions of dollars) below represent the expected first- year economic profits from each strategy. What will the resulting first-year payoff be for GemT (left side of the table player) after playing the game with RareS (top of the table player)? $ Answer in millions of dollars (i.e. a value shown in the table, with no decimal places, $ sign, spaces or commas). Launch Does not launch c. What is the dominant strategy for GemT? dominant strategy. Type Y for Yes or N for Launch 13, 13 3,76 Does not launch 84,4 22, 27 Type L for Launch, X for Does not launch or N for No
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Tanzanite is one of the world's rarest gemstones, said to only be found in Tanzania. Assume GemT and Rares are the only 2 firms in the
world selling Tanzanite gemstones. Hence, they both hold large market shares in the market for Tanzanite.
Answer the following questions:
a. Could the two firms earn economic profits in the Tanzanite gemstone market?
No.
b. As a new year is approaching, GemT and RareS are deciding whether to launch a new collection of Tanzanite gemstones. Launching
a new collection will bring in higher revenue but will also incur large marketing and design costs. GemT's payoff will also be affected by
RareS' decision to launch a new collection and vice versa. The payoff values (in millions of dollars) below represent the expected first-
year economic profits from each strategy. What will the resulting first-year payoff be for GemT (left side of the table player) after playing
Answer in millions of dollars (i.e. a value shown in the
the game with Rares (top of the table player)? $
table, with no decimal places, $ sign, spaces or commas).
Launch
Does not launch
Type Y for Yes or N for
Launch
13, 13
3,76
Does not launch
84,4
22, 27
Type L for Launch, X for Does not launch or N for No
c. What is the dominant strategy for GemT?
dominant strategy.
d. If GemT and RareS are able to communicate and collaborate, would they be able to achieve a collectively better outcome?
Type Y for Yes or N for No.
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