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
Date Written: January 18, 2011
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: Suggested Citation