With the deepen of market competition, product pricing and production decision problem in many firms have become more and more important. A bilevel model is proposed to describe the pricing and production decisions with fuzzy demand and fuzzy cost parameters. The upper level is to determine the optimal price and production quantity with capacity constraints. Using this information, the lower level problem tries to structure a response (the distribution pattern of customers (or markets)) that will satisfy his demand at minimum cost. And after transforming the fuzzy numbers into the crisp value by Graded Mean Integration Representation method, the solution algorithm based on difference method is given. Finally, the application of the model and its algorithm are illustrated with a simple example.
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