Okay since you are interested in the actual economics I will respond. I figured you were just lobbying from a consumer perspective which really it sort of is an appeal to consumers rather than from a firm perspective.

but not their exact production costs. Why would Nvidia gpus be more cost effective than AMD in fabrication?

Simply put market position and economies of scale. You have to understand at a deeper level how competition works at the highest level of the echelon. Nvidia is a market leader, AMD therefor has a market position of differentiation. Since Nvidia is the market leader they have the most money put into R&D. The entire game of running tech companies is who can be more efficient, it is one discovery that drives the next.

Now I do not know explicitly, since I am not in the graphic card industry, however, I've been around the block. And business economics generally seem to fall as you'd expect them.

Nvidia is the stronger company of the two, in terms of development. The reason that this is an announcement between two flagship cards is simply because the small area that they've found to prospect in the market to be a leader on likely doesn't apply to their whole line of cards.

If they had suddenly become much better at development than Nvidia, the announcement wouldn't be about some uber expensive flagship card. It would be about a new set of technologies that allow them to scale at a much better rate than Nvidia.

And to be honest, AMD has mastered the art of being #2, that's okay. Business isn't always about being a leader, it's ultimately about being profitable and reducing volatility, it's about survival.

That being said, generally when you ARE the most efficient at producing something, you generally try to leverage price when you can (all things being equal).

Pricing this at or below Nvidias equivalent flagship (and in actuality a true competitor does not exist yet) would do a couple things.

1) This card has much higher specs, so we can easily deduce the cost is higher since AMD is not a market leader, so they are not able to produce it at a lower cost. This means that likely they would LOSE money matching a much lower spec'd card.

2) If Nvidia decided to retaliate by engaging in a price war, it would likely destroy AMD. This would also greatly impact Nvidias short term financials. Nvidia would have to be pushed into action to do this. Selling a flagship card at below flagship prices could start that war.

3) Even if only a modest profit was obtained and Nvidia did not engage in a price war, it would be the least optimal pricing strategy, since the goal is not to optimize revenue, but profit. And in a market leading position you are entitled to above average profits. To use standard demand\supply curves is really just sacrificing margin for no benefit.