Carol Skonberg, a housewife and part-time piano teacher, thought she was filling a crying need with her wineglass jewelry (“Eve Tahmincioglu, “Even the Best Ideas Don’t Sell Themselves,” New York Times, October 9, 2003, C9). Her Wine Jewels are sterling silver charms of elephants, palm trees, and other subjects that hook on wineglass stems so that people don’t lose their drinks at parties. In 2000, her first year, she signed up 90 stores in Texas to carry her charms. Then, almost overnight, orders disappeared as rival companies offered similar products—with names such as Wine Charms, Stemmies, and That Wine Is Mine—at lower prices. Ellen Petti started That Wine Is Mine in 1999. She set up a national network of sales representatives and got the product in national catalogs. Its sales surged from $250,000 the first year to $6 million in 2001, before falling to $4.5 million in 2002, when she sold the company. Tina Matte’s firm started selling Stemmies in late 2000, making $90,000 in its first year, before sales fell to $75,000 the following year. Assume that this market is competitive and use side-by-side firm and market diagrams to show what happened to prices, quantities, number of firms, and profit as this market evolved over a couple of years. (Hint: Consider the possibility that firms’ cost functions differ.)

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