Hive Calculator Calculator

Lerner Index Calculator

Compute the Lerner Index using Price and Marginal Cost.

Lerner Index Calculator

In economics and business, one of the most powerful tools to measure a firm’s market power is the Lerner Index. It shows how much a company can mark up its prices over its marginal cost, providing valuable insights into pricing strategies, competition, and monopoly power.

Our Lerner Index Calculator simplifies this calculation by instantly computing the index using only two values: Price and Marginal Cost. Whether you are an economics student, a business analyst, or a researcher studying market structures, this tool will help you quickly determine the degree of monopoly power in pricing.

What is the Lerner Index?

The Lerner Index is an economic measure of a firm’s pricing power, developed by economist Abba Lerner. It represents the difference between the price charged by a firm and its marginal cost of production, relative to the price.

Lerner Index = (P − MC) ÷ P

Where: P = Price charged by the firm MC = Marginal cost of production
The Lerner Index ranges from 0 to 1: • 0 → Perfect competition (no pricing power, Price = Marginal Cost). • Closer to 1 → Greater monopoly power (high markups, weak competition).

Example Calculations

Example 1

Price (P) = 1200

Marginal Cost (MC) = 800

Lerner Index = (1200 − 800) ÷ 1200 = 400 ÷ 1200 = 0.3333

✅ Lerner Index = 0.33

Example 2

Price (P) = 500

Marginal Cost (MC) = 500

Lerner Index = (500 − 500) ÷ 500 = 0 ÷ 500 = 0

✅ Lerner Index = 0

Example 3

Price (P) = 200

Marginal Cost (MC) = 50

Lerner Index = (200 − 50) ÷ 200 = 150 ÷ 200 = 0.75

✅ Lerner Index = 0.75

Why Use the Lerner Index Calculator?

✔ Quick Calculations – No need for manual formulas.
✔ Accurate Insights – Understand true market power instantly.
✔ User-Friendly Interface – Enter two values, get results immediately.
✔ Time-Saving – Ideal for students, professionals, and businesses.
✔ Educational Tool – Helps learners grasp pricing power concepts in economics.

Real-World Applications

Economics Research – Measure pricing power across industries.
Business Strategy – Analyze whether a company has room for higher markups.
Antitrust Analysis – Used by governments and regulators to identify monopolistic behavior.
Market Studies – Compare firms in competitive vs monopoly-like structures.
Academic Use – A core concept in microeconomics, industrial organization, and market theory.

Who Can Benefit from This Calculator?

Students & Teachers – Solve assignments, case studies, and classroom examples.
Business Analysts & Economists – Evaluate pricing efficiency and competition.
Researchers & Policy Makers – Study monopoly power in markets.
Companies & Entrepreneurs – Assess how much pricing flexibility they have.

✅ The Lerner Index Calculator is the fastest and most reliable way to measure market power using price and marginal cost. Instead of solving formulas manually, you can instantly find out whether a firm operates in competitive, monopolistic, or oligopolistic conditions.

👉 Try the Lerner Index Calculator today on Hive Calculator and gain deep insights into market pricing and competition with just one click.