Abstract：Based on the data of China’s passenger car market, using the frontier method of empirical industry organization, this study explores how to accurately identify consumer preference heterogeneity and optimize product line pricing. The study finds that: Chinese consumers have a random preference for vehicle performance. Neglecting this feature can lead to mistakes in the pricing decisions of the enterprise. After considering differences in consumer preferences and differences in corporate costs, vehicle manufacturers have used product lines for price discrimination. Counterfactual simulations show that although the single-car pricing strategy can effectively reduce the average price, but compared with the product line discrimination, corporate profits and overall market sales have decreased significantly. The current product line discrimination is optimal strategy, prohibiting discriminatory pricing will damage the overall welfare of the society.
