The Lerner index is a formula to quantify a firm's monopoly power:
- Lerner index = (P-MC)/P
where P is the price and MC is the marginal cost.
The index ranges from 0 (no monopoly power) to 1 (complete monopoly power when MC=0).
This index has been criticized for relying on MC, which is not usually known, and for being static rather than dynamic.