Lerner index

The Lerner index increases as demand becomes less elastic. "

The Lerner index is a measure of market power - the ability of a firm to charge a price that exceeds marginal cost.

The Lerner index describes the relationship between elasticity and price margins for a profit-maximizing firm; it can never be greater than one.

The Lerner index and Herfindahl index may be used to measure market power.

The Lerner index, named after the economist Abba Lerner, describes a firm's market power.

The measure of market power known now as the Lerner index was formalized by Abba Lerner in 1934.

The Lerner Index measures potential monopoly power as mark-up of price over marginal cost divided by price or equivalently the negative inverse of demand elasticity.

If the Lerner index can't be greater than one, then elasticity can never be greater than 1 (the absolute value of elasticity of demand can never be less than zero).