Product Differentiation and Multiproduct Strategies

This paper analyzes the price-setting behavior of multiproduct firms in a differentiated product market. While some companies adopt the strategy of independent Product Managers, others take price decisions centrally. We investigate what role the demand structure plays in the optimal organizational arrangement. It results endogenous and characterized in terms of conjectural variations. Show the strategy of coordinated Product Managers is always profitable, in the case of market segmentation. Differently, under market interlacing, the strategy of relying on competitive product managers is profitable when monopolistic competition arises. It may be profitable with oligopolistic competition under some (not very restrictive) assumptions.