Hierarchical nature of decision making of producers and consumers in designing, producing and pricing of new products demands to employ a decentralized decision making structure. Bi-level programming (BLP) is one of the best choices to model such problems. In this paper a bi-level programming model is proposed for new product line selection and pricing problem in which producer try to maximize his/her profit considering different market segments’ choices in a competitive environment. In first level of BLP, producer makes decisions regarding launching a set of new products and determining their prices. In the second level, the consumer wants to maximize his/her utility by choosing the most desired product offered by producer and other competitors. The results show that BLP can be tailored very successfully to the problem with realistic assumptions. To the best of our knowledge, there is no work that has modeled this problem as a bi-level program.
