Adam and Catherine are choosing between two ice cream shops, Icy and Frosty, located at either…

Adam and Catherine are choosing between two ice cream shops, Icy and Frosty, located at either end of a 1-mile-long beach. Adam is standing in front of Icy, while Catherine is standing in front of Frosty. Both Adam and Catherine are each willing to pay, at most, $6 for one ice cream cone. It costs them $1 to walk the 1-mile distance between the shops. Icy is government-run, so the price is fixed at exactly $4/cone and will not change. The shops face costs of $0.25/cone. What price should Frosty charge if it is to maximize its total profits from Adam and Catherine?

 

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