Multi-product Pricing

Almost all the firms have more than one product in their line of production. Even the most specialized firms produce a commodity in multiple models, styles and size, each so much differentiated from the other that each model or size of the product may be considered a different products e.g. the various models of television, refrigerators etc produced by the same company may be treated as different product for at least pricing purpose. The various models are so differentiated that consumers view them as different products. Hence each model or product has different average revenue (AR) and Marginal Revenue curves and that one product of the firm concepts against the other product. The pricing under this condition is known as multi-product pricing or product line pricing. In multi-product pricing, each product has a separate demand curve. But, since all of them are produced under one organization by interchangeable production facilities, they have only one inseparable marginal cost curve. That is, while revenue curves, AR and MR, are separate for each product, cost curves AC and MC are inseparable.