It is important from a policy viewpoint to determine how the market behavior of monopolistic firms changes after a conglomerate merger. Recently, Bradburd [11 analyzed the effect of a conglomerate merger on the price (quantity) policy of a monopolistic subsidiary under uncertainty, assuming that the monopolistic parent does not change its price. This is restrictive because the conglomerate seeks to maximize the expected utility of its total wealth. Hence it is necessary to examine the effect of conglomeration when both the parent and the subsidiary are allowed to change their policies. In addition, Bradburd does not allow for general patterns of uncertainty because his model requires the variance of profits to increase with price. Finally, Bradburd's analysis assumes that unit costs are constant.