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A note on measuring multi-product market power using the lerner index

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  • Färe, Rolf
  • Karagiannis, Giannis

Abstract

In this note we re-examine Shaffer and Spierdijk (2020) conditions for the aggregate Lerner index to be equal to the weighted-average of product-specific Lerner indices and we show that they can be made weaker than assuming a separable cost function with a linear output aggregation function. In particular, we verify that the aggregate Lerner index is equal to the weighted average of the product-specific Lerner indices, with revenue share as weights, if the cost function is separable in outputs and the output aggregation function is linearly homogenous.

Suggested Citation

  • Färe, Rolf & Karagiannis, Giannis, 2026. "A note on measuring multi-product market power using the lerner index," Economics Letters, Elsevier, vol. 259(C).
    • Handle: RePEc:eee:ecolet:v:259:y:2026:i:c:s0165176525006354
    DOI: 10.1016/j.econlet.2025.112798
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    References listed on IDEAS

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    1. Encaoua, David & Jacquemin, Alexis & Moreaux, Michel, 1986. "Global Market Power and Diversification," Economic Journal, Royal Economic Society, vol. 96(382), pages 525-533, June.
    2. Rolf Färe & Giannis Karagiannis, 2024. "The denominator rule with unit ratio difference," Journal of Productivity Analysis, Springer, vol. 61(2), pages 183-190, April.
    3. Färe, Rolf & Karagiannis, Giannis, 2020. "On the denominator rule and a theorem by Janos Aczél," European Journal of Operational Research, Elsevier, vol. 282(1), pages 398-400.
    4. Hall, Robert E, 1973. "The Specification of Technology with Several Kinds of Output," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 878-892, July-Aug..
    5. Dickson, V. A., 1979. "The Lerner index and measures of concentration," Economics Letters, Elsevier, vol. 3(3), pages 275-279.
    6. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 1(3), pages 157-175.
    7. Färe, Rolf & Karagiannis, Giannis, 2017. "The denominator rule for share-weighting aggregation," European Journal of Operational Research, Elsevier, vol. 260(3), pages 1175-1180.
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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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