Lerner Index Calculator

Your details

Direct mode: enter P and MC to compute L. Elasticity mode: enter the price elasticity to get L = 1 / |elasticity|. Reverse mode: enter MC and a target index to find the required price.
The price the firm charges per unit.
USD
The additional cost of producing one more unit.
USD
Lerner IndexHigh Market Power
0.4

Market power score from 0 (perfect competition) to 1 (pure monopoly)

Price-Cost Markup0.4%
Absolute Markup60USD
Implied Elasticity-2.5
Market StructureOligopoly / Dominant firm
0.4
Perfect competition<0.05Low power0.05-0.15Moderate power0.15-0.35High power0.35-0.6Monopoly0.6+

Lerner Index: 0.4000 - High Market Power

  • A Lerner Index of 0.4000 means the firm marks up price by 40.0% above marginal cost relative to price. Market structure: high market power.
  • At profit-maximising output, this index implies a price elasticity of demand of approximately -2.500. The more elastic demand is, the harder it is to sustain a high markup.
  • The absolute price-cost margin is 60.00 USD per unit. Regulators often use this gap as an indicator of excess profit in antitrust investigations.

Next stepPair this result with the Herfindahl-Hirschman Index (HHI) and profit margin data for a fuller picture of competitive conditions in the market.

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