Text 1

When companies in the same industry propose merging with one another, they often claim that the merger will benefit consumers by increasing efficiency and therefore lowering prices. Economist Ying Fan investigated this notion in the context of the United States newspaper market. She modeled a hypothetical merger of Minneapolis-area newspapers and found that subscription prices would rise following a merger.

Text 2

Economists Dario Focarelli and Fabio Panetta have argued that research on the effect of mergers on prices has focused excessively on short-term effects, which tend to be adverse for consumers. Using the case of consumer banking in Italy, they show that over the long term (several years, in their study), the efficiency gains realized by merged companies do result in economic benefits for consumers.

Based on the texts, how would Focarelli and Panetta (Text 2) most likely respond to Fan's findings (Text 1)?

Question

Text 1

When companies in the same industry propose merging with one another, they often claim that the merger will benefit consumers by increasing efficiency and therefore lowering prices. Economist Ying Fan investigated this notion in the context of the United States newspaper market. She modeled a hypothetical merger of Minneapolis-area newspapers and found that subscription prices would rise following a merger.

Text 2

Economists Dario Focarelli and Fabio Panetta have argued that research on the effect of mergers on prices has focused excessively on short-term effects, which tend to be adverse for consumers. Using the case of consumer banking in Italy, they show that over the long term (several years, in their study), the efficiency gains realized by merged companies do result in economic benefits for consumers.

Based on the texts, how would Focarelli and Panetta (Text 2) most likely respond to Fan's findings (Text 1)?

Accepted Answer

They would encourage Fan to investigate whether the projected effect on subscription prices persists over an extended period.

Answer

They would recommend that Fan compare the near-term effect of a merger on subscription prices in the Minneapolis area with the effect of a merger in another newspaper market.

Answer

They would argue that over the long term the expenses incurred by the merged newspaper company will also increase.

Answer

They would claim that mergers have a different effect on consumer prices in the newspaper industry than in most other industries.