The Lerner Index of Monopoly Power: Origins and Uses

Elzinga, Kenneth G.; Mills, David E.

doi:10.1257/aer.101.3.558

Cited by 126 publications

(60 citation statements)

References 20 publications

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“…Lerner index is one of non-structural approaches in measuring competition. Lerner index is the most commonly used indicator for explaining competition (Adhamovna 2016) and is also the most widely cited index (Elzinga and Mills 2011). The Lerner index was initiated by Abba Lerner's 1934 paper in the Review of Economic Studies (Elzinga and Mills 2011).…”

Section: Literature Reviewmentioning

confidence: 99%

Competition and bank profitability

Yuanita¹

2019

Economic Structures

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By issuing Indonesian Banking Architecture in 2004, the central bank of Indonesia has encouraged banking sector to consolidate. The aim of merger among others is to increase bank economies of scale. This study tries to look at the impact of merger bank on the bank performance by implementing structure conduct and performance hypothesis. Merger bank affects market structure. According to structure conduct and performance hypothesis, market structure affects bank behavior as well as bank performance. The result of this study suggests that an increase in market concentration causes a decrease in price. It shows that merger increase economies of scale so that bank can offer lower price. A decrease in price brings down bank profitability. Concentration ratio also can be used as competition measurement. It is known as a structural measure of competition. Using the structural measure, a lower competition that is shown by higher concentration ratio is associated with lower profitability. This research also analyses the relationship between competition and bank profitability using Lerner index as a non-structural measure of competition. The non-structural measure of competition shows that lower competition is associated with higher profitability. Hence, the structural measure of competition creates different result from the non-structural measure of competition.

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Section: Literature Reviewmentioning

confidence: 99%

Competition and bank profitability

Yuanita¹

2019

Economic Structures

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“…Whereas a low level of an estimated Lerner index can be interpreted as the absence of market power (Elzinga and Mills, 2011), finding a high Lerner index does not translate equally well into evidence for the exercise of market power. Economies of scale or the need to recover fixed cost may also be captured in the estimates (Lindenberg and Ross, 1981).…”

Section: Discussionmentioning

confidence: 93%

Investigating the Influence of Firm Characteristics on the Ability to Exercise Market Power A Stochastic Frontier Analysis Approach with an Application to the Iron Ore Market

2014

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. AbstractThis paper empirically analyzes the existence of market power in the global iron ore market during the period 1993-2012 using an innovative Stochastic Frontier Analysis approach introducedby Kumbhakar et al. (2012). In contrast to traditional econometric procedures, this approach allows for the estimation of firm-and time-specific Lerner indices and, therefore, the assessment of the influence of individual firm characteristics on the ability to generate markups. We find that markups on average amount to 20%. Moreover, location and experience are identified to be the most important determinants of the magnitude of firm-specific markups.

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“…Each of these basic approaches is in wide use nowadays. We may name few works by K. J. Elzinga and D. E. Mills (2011) [12], L. Correa and P. Crocioni (2012) [13], J. Tirole and E. Glen Weyl (2012) [14], S. Littlechild (2014) [15], N.-P. Schepp and A. Wambach (2016) [16], and B. Hintermann (2017) [17]. The downside of these studies is their fragmentation, as they focus only on some dimensions of competition.…”

Section: Brief Literature Reviewmentioning

confidence: 99%

The methodology of competition assessment

Gerasymenko¹,

Borovyk²,

Afendikova³

2017

EA-XXI

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Introduction. Since competition influences all the spheres of economic life, its research is scattered among different fields of economic science and different research areas. The purpose of the article is to systematize existing approaches to competition assessment, based on single multidimensional methodological approach, to make economic competition research at the micro-, meso-and macrolevels better managed and presented, as well as to develop comprehensive system of indicators to assess the state of economic competition. Results. Having used the Porter's diamond model, the authors divided three dimensions of competition research: horizontal (within the relevant market or stack of related markets), vertical (within the process chain), and potential competition dimension (within all the markets in the economy due to the capital flow between them that provides competitive pressure on the participants of the relevant market). The sets of indicators of the relevant type of competition are identified within every research dimension. Combined use of these indicators allows us to determine current state of competition in the market, and to verify the results obtained. The aggregated system of competition indicators is introduced to ensure comprehensive and more profound analytical support for managerial decisions.

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The Lerner Index of Monopoly Power: Origins and Uses

Cited by 126 publications

References 20 publications

Competition and bank profitability

Competition and bank profitability

Investigating the Influence of Firm Characteristics on the Ability to Exercise Market Power A Stochastic Frontier Analysis Approach with an Application to the Iron Ore Market

The methodology of competition assessment

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