John Wenman, merchandising manager at the Goodmark's stationary store, is setting price for Craft fountain pens

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

Yes, it is fair for the consumer, but it creates a loss for John. Let me explain. A consumer has a price point in their head for how much they ware willing to pay for a product. This is their opinion, and their sentiment. If they are willing to pay 10$, then they are willing to pay 10$, even if it is only worth 7.50$ The fairness should not even be a question here, since all consumer will have a different opinion on what is fair. Some consumers will think the price of the pen will only be fair at 5$ - the manufacturing cost. They just won't be interested in this product. Others will find value in the craftsmanship and quality of the pen, and will see value at 10$. Some might even see buy the product for 12$.

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

This is a tricky question. It in theory is illegal, because the price of them pen was only set at 10$ for a certain period of time. Then, he claims the price is now only 7.50$. How could a price fall so quickly? Usually a sale means that the product has been on the shelves for a long time, and that stock is running out, or the product has been available for a while, and the company needs to put it in sale to make room for new merchandise.
A popular example is a clothing store in Canada called Suzi Sheir. Suzi Sheir had to pay 1 million dollar fine for their illegal marketing. Suzy Shier placed price tags on garments indicating a "regular" and "sale" price when the garments were not sold in any significant quantity or for any reasonable period of time at the "regular" price. The issue is here how to people know what a bargain really is? Competition Act provisions are designed to ensure that when products are promoted at sale prices, consumers are not misled by references to inflated regular prices

It would have been legal if then pens were priced at 10$ for a long period of time, and then to make room for more stock, or to clear out merchandise, he would then reduce the price to $7.50.

It would also be legal he is just kept the price at 10$ and aimed for a greedier profit margin.

Ethically it is also deceiving. Imagine a person who bought a pen on day 1 for 10$ only to go back to the store 2 days later and then see the pen for 7.50$? It will isolate all of his clients, and make him look like a crook.

03.How would you have set and advertise the Crafts pen's price? Would you have used a cost plus approach or some other method? Explain.

I would have done market research to see how many people would be willing to pay for the pen. The geographical region where I set up my store would influence this price. If I have a few stores in a few cities, I have no problem offering the pen at different prices due to cost of living standards. I would then set my price at the market standard, and keep it there for a while. If the pens sell well, I will keep the same price, but if after a few months, I have a lot of inventory left which I need to liquidate, I would put the pen on sale. I would also be clear in my intentions that the price used to cost 10$ for the past 6 months, but now there is a new model of pen coming in, I would like to reduce it to 7.50$ to make room. I would use a combination of consumer opinion price, and cost plus approach. If then pen cost 5$ to make, and consumers were only willing to pay 4$, then I would need to rethink my product. As long as the pen prices 50% higher then the manufacturing price, then I set the pen at that level.

I would advertise the price as is - whether it be 7.50$ 10$ or any other figure. I would include any overly inflated regular price. When the item goes on sale, I will advertise the new price, and make mention of the old price in an honest way. I would leave the price tag with the old price on the pen so consumers can actually see the value of the sale.