Pricing Behavior - The Lerner Index
The Lerner Index measures the difference between price and marginal cost as a fraction of the price of a product in order to determine the extent of the industry markup, thus L = (P-MC)/P
When P=MC, L=0 => competition
When P>MC, Lɬ => price searcher market
The Markup Factor is P=[(1)/(1-L)]MC