A modern firm often employs multiple production technologies based on distinct engineering principles, causing non-convexities in the firm s unit cost as a function of product quality. Extending the model of Mussa and Rosen (1978), this paper investigates how a monopolist s productline design...

We revisit the issue of product line design by a monopolist andextend the model of Mussa and Rosen (1978) in two ways. First, weconsider the case in which the unit cost is a nonconvex function ofproduct quality. We show that the firm does not offer those qualitieswhere the unit cost is linear or...