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The common use of the profits-sales ratio as a measure of the Lerner index of monopoly power is flawed, even with the assumption of constant returns, because of problems connected with the valuation of capital. The size of the error is related to the cost of capital, the growth rate of the firm,...

Airline deregulation has brought a wave of airline mergers, approved by the Departments of Transportation (DOT). Where markets are truly contestable, approving mergers makes sense. Where entry is difficult, however, detailed analysis is required. United Airlines' acquisition of Pan American's...