Question
Peter considers buying a fountain pen. He will also have to buy ink cartridges to use with the fountain pen and there is only one
Peter considers buying a fountain pen. He will also have to buy ink cartridges to use with the fountain pen and there is only one seller of such items in town. Peter's demand for cartridges is linear. If the price of a cartridge is $0.5, he would buy 20, and he would buy 0 if the unit-price of a cartridge is $4. The cost of producing the fountain pen is $20 and the cost a producing a cartridge is $0.5.
Suppose that the fountain pen is sold as a bundle with 20 cartridges. What price should the seller charge for the bundle to maximise his/her profit?
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