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The Lerner Index of Monopoly Power: Origins and Uses

  • Kenneth G. Elzinga
  • David E. Mills

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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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. 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.
  2. 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.
  3. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October.
  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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