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The Lerner Index of Monopoly Power: Origins and UsesKenneth G. ElzingaUniversity of Virginia - Department of Economics David E. MillsUniversity of Virginia - Department of Economics January 18, 2011 American Economic Review: Papers & Proceedings, Vol. 101, No. 3, 2011 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.
Number of Pages in PDF File: 16 Keywords: Lerner Index, Market Power, Monopoly Power JEL Classification: L10, L40, B21 Accepted Paper SeriesDate posted: July 15, 2011Suggested CitationContact Information
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