Reference no: EM13952761

John Wenman, merchandising manager at Goodmark's stationery store, is setting the price for Craft fountain pens. The pens cost him $5 each. The store's usual markup is 50 percent over cost, which suggests that John should set the price at $7.50. However, to make this price seem like an unusually good bargain, John begins by offering the pen at $10. He realizes that he won't sell many pens at this inflated price, but he doesn't care. John holds the price at $10 for only a few days, and then cuts it to the usual level-$7.50-and advertises: "Terrific Bargain on Craft Pens. Were $10, Now Only $7.50!"

1. If consumers perceive Craft pens to be a good value at $10, is it fair for Good mark's to sell the pen at that price?

2. Is John's price setting approach ethical? Is it legal? Explain.

3. How would you have set and advertised the Craft pen's price? Would you have used a cost-plus approach or some other method? Explain