Market Power and the Lerner Index: A Classroom Experiment
AbstractWe describe a classroom experiment that illustrates the concepts of market power and the Lerner Index. Students are organized in groups, each making a decision for a monopolist. Monopolists face different (unknown) demand curves, each with a different (constant) elasticity. Through repetition, students discover the profit maximizing solution and find that different monopolies have different mark-ups. The experimenter then reveals the unknown demand curves and illustrates how different elasticities are graphically and numerically connected to mark-ups and the Lerner index. The experiment can be used in a wide variety of courses including principles of economics, intermediate microeconomics, industrial organization, international trade, managerial economics and MBA classes. The experimental design is flexible: it can accommodate different class sizes (ranging from 10 to 100+ students) as well as different demand parameterizations. Finally, to reinforce the economic concept of profit maximization (MR=MC) in this setting, we also suggest and describe the implementation of an exercise based on the experimental design.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by De Gruyter in its journal Journal of Industrial Organization Education.
Volume (Year): 5 (2011)
Issue (Month): 1 (March)
Contact details of provider:
Web page: http://www.degruyter.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Gerald Eisenkopf & Pascal Sulser, 2013.
"A Randomized Controlled Trial of Teaching Methods: Do Classroom Experiments Improve Economic Education in High Schools?,"
Working Paper Series of the Department of Economics, University of Konstanz
2013-17, Department of Economics, University of Konstanz.
- Gerald Eisenkopf & Pascal Sulser, 2013. "A Randomized Controlled Trial of Teaching Methods: Do Classroom Experiments improve Economic Education in High Schools?," TWI Research Paper Series 80, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
- Gerald Eisenkopf & Pascal Sulser, 2013. "How to Improve Economic Understanding? Testing Classroom Experiments in High Schools," Working Paper Series of the Department of Economics, University of Konstanz 2013-04, Department of Economics, University of Konstanz.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.