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The Lerner Index of Monopoly Power: Origins and Uses

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  • Kenneth G. Elzinga
  • David E. Mills

Abstract

Abba Lerner's paper in the Review of Economic Studies (1934) is the source of what is now referred to as the Lerner Index of monopoly power. The Lerner Index has become the standard measure of monopoly power and one of the most widely cited indexes in the discipline of economics. This paper traces the origins of the index, sets out its strengths and weaknesses, and examines its role in antitrust enforcement. The Index is a better indicator of a firm's price-setting discretion than its ability to sustain monopoly prices.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.558
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 101 (2011)
Issue (Month): 3 (May)
Pages: 558-64

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Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:558-64

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  1. Robert E. Hall, 1986. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
  2. Holt, Charles Jr., 1982. "On the use of profit data to estimate the social cost of monopoly power in an oligopoly," Journal of Economics and Business, Elsevier, vol. 34(4), pages 283-289.
  3. Pindyck, Robert S., 1984. "The measurement of monopoly power in dynamic markets," Working papers 1540-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  4. Saving, Thomas R, 1970. "Concentration Ratios and the Degree of Monopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(1), pages 139-46, February.
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Cited by:
  1. Fu, Xiaoqing (Maggie) & Lin, Yongjia (Rebecca) & Molyneux, Philip, 2014. "Bank competition and financial stability in Asia Pacific," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 64-77.
  2. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2013. "In Defense of Trusts: R&D Cooperation in Global Perspective," Tinbergen Institute Discussion Papers 13-045/II, Tinbergen Institute, revised 04 Mar 2014.
  3. Tabacco, Giovanni Alberto, 2013. "A new way to assess banking competition," Economics Letters, Elsevier, vol. 121(2), pages 167-169.
  4. Lawrence J. White, 2013. "Monopoly and Dominant Firms: Antitrust Economics and Policy Approaches," Working Papers 13-13, New York University, Leonard N. Stern School of Business, Department of Economics.
  5. T.V.S. Ramamohan Rao, 2012. "Firm Specific Monopoly Power in Differentiated Oligopoly," Journal of Quantitative Economics, The Indian Econometric Society, vol. 10(1), pages 85-97, January.

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