The Lerner Index of Monopoly Power: Origins and Uses

American Economic Review: Papers & Proceedings, Vol. 101, No. 3, 2011

16 Pages Posted: 15 Jul 2011  

Kenneth G. Elzinga

University of Virginia - Department of Economics

David E. Mills

University of Virginia - Department of Economics

Date Written: January 18, 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.

Keywords: Lerner Index, Market Power, Monopoly Power

JEL Classification: L10, L40, B21

Suggested Citation

Elzinga, Kenneth G. and Mills, David E., The Lerner Index of Monopoly Power: Origins and Uses (January 18, 2011). American Economic Review: Papers & Proceedings, Vol. 101, No. 3, 2011. Available at SSRN: https://ssrn.com/abstract=1884993

Kenneth G. Elzinga (Contact Author)

University of Virginia - Department of Economics ( email )

PO Box 400182
Charlottesville, VA 22904-4182
United States

David E. Mills

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States

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