In order to improve productivity and reduce costs, manufacturing firms use product families to provide variety while maintaining economies of scale. In a competitive marketplace, designing a successful product family requires considering both customer preferences and the actions of other firms. This dissertation will conduct fundamental research on how to design products and product families in the presence of competition. We consider both single product and product family design problems. We use game theory to construct a model that includes the competition's product design decisions. We use separation, a problem decomposition approach, to replace complex optimization problems with simpler problems and find good solutions more efficiently. We study the well-known universal electric motor problem to demonstrate our approaches. This dissertation introduces the separation approach, optimizes product design with competition, models product family design under competition as a two-player zero-sum game, and models product family design with design and price competition as a two-player mixed-motive game. This dissertation formulates novel product design optimization problems and provides a new approach to solve these

problems.