An Extension of Lerner's Monopoly Index for Markets with a Disparity between Long- and Short-run Demand Elasticities

Moshe Justman

Economic Inquiry, 1987, vol. 25, issue 4, 681-94

Abstract: This paper develops a theoretical analysis of steady-state monopoly pricing in markets with a disparity between long- and short-run demand elasticities, based on a separation between the long-run demand schedule and the adjustment process that underlies a ctual demand levels. This sheds light, in a practical context, on the impact of the speed of adjustment and the firm's discount rate on it s equilibrium markup and on the measurement of realized monopoly powe r. An illustrative application of the analysis to existing empirical data supplements the theoretical presentation. Copyright 1987 by Oxford University Press.

Date: 1987
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