Lerner index

The Lerner Index is a measure used in economics to assess a company's market power. It indicates how much a company can increase its prices above the costs of production. Specifically, it is calculated as the difference between price and marginal cost, divided by the price. A higher Lerner Index means a firm has more control over pricing and can earn greater profits, suggesting it's operating in a less competitive market. Conversely, a lower index indicates more competition, limiting pricing power. This index helps analyze market structures and the behavior of firms within those structures.