The Lerner Index is preferred to the Herfindahl-Hirschman Index as a measure of market power due to the former's simplicity and straightforward interpretation.

Question

Quizplus · Accepted Answer

The Lerner Index and the Herfindahl-Hirschman Index (HHI) serve different purposes: the Lerner Index measures a firm's pricing power above marginal cost, while the HHI measures market concentration. Their preference depends on the context of the analysis rather than simplicity or interpretation alone.

The Lerner Index Is Preferred to the Herfindahl-Hirschman Index as a Measure