EconPapers    
Economics at your fingertips  
 

The Lerner index and revenue maximization

Laura Spierdijk and Michalis Zaouras

Applied Economics Letters, 2017, vol. 24, issue 15, 1075-1079

Abstract: Based on profit-maximizing behaviour, the usual interpretation of the Lerner index is that a zero value reflects competitive behaviour, while a positive value is associated with market power. We investigate to what extent the usual interpretation of the Lerner index remains valid in a setting where firms do not pursue profit maximization, but instead maximize revenues subject to a minimum-profit constraint. We show that a positive Lerner index still indicates market power, but that the magnitude of a positive Lerner index can no longer be used to determine how much market power there is. Furthermore, extra information would be required to draw conclusions about the presence or absence of market power when the Lerner index is zero or negative. We discuss the empirical implications of our results.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2016.1254333 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:24:y:2017:i:15:p:1075-1079

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2016.1254333

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2025-03-20
Handle: RePEc:taf:apeclt:v:24:y:2017:i:15:p:1075-1079