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The Lerner Index and Economic Efficiency

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This short paper brings together two literatures: the first is the Lerner Index as a measure of imperfect competition familiar from industrial organization and the second is a measure of performance from the efficiency literature, namely the Nerlovian indicator. We show how these may be related and the resulting decomposition of the Lerner index which results.
Cite this paper
Chambers, R. , Färe, R. and Grosskopf, S. (2014) The Lerner Index and Economic Efficiency. Theoretical Economics Letters, 4, 803-805. doi: 10.4236/tel.2014.49101. 
 

[1] Farrell, M.J. (1957) The Measurement of Productive Efficiency. Journal of the Royal Statistical Society Series A, General, 120, 253-281. http://dx.doi.org/10.2307/2343100
[2] Georgescu-Roegen, N. (1951) The Aggregate Linear Production Function and Its Application to the Von Neumann Economic Model. In: Koopmans, T., Ed., Activity Analysis of Production and Allocation, Wiley, New York.
[3] Lerner, A.P. (1934) The Concept of Monopoly and the Measurement of Monopoly Power. The Review of Economic Studies, 1, 157-175. http://dx.doi.org/10.2307/2967480
[4] Samuelson, P.A. (1964) A.P. Lerner at Sixty. The Review of Economic Studies, 31, 169-178.
http://dx.doi.org/10.2307/2295906
[5] Chambers, R.G., Chung, Y. and Färe, R. (1998) Profit, Directional Distance Functions, and Nerlovian Efficiency. Journal of Optimization Theory and Applications, 98, 351-364.
http://dx.doi.org/10.1023/A:1022637501082
[6] Luenberger, D.G. (1992) New Optimality Principles for Economic Efficiency and Equilibrium. Journal of Optimization Theory and Applications, 75, 221-264. http://dx.doi.org/10.1007/BF00941466                 eww141208lx
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