The paper is concerned with the determinants of prices of European and Japanese cars in five EEC countries. The basic idea is that under perfect competition, prices should reflect production costs, and hence depend on the technical characteristics of the commodities. Differences between list prices and prices explained by these characteristics result from market imperfections or product differences not accounted for by measurable characteristics. Estimation results show that there is both discrimination and differentiation; but to a very large extent, price differentials across countries are due to discriminating practices.