Advertising and Competition in Banking: Reply to Comment by Morton Schnabel

• Author: Franklin R. Edwards
• Published date: 01 June 1974
• Date: 01 June 1974
• DOI: http://doi.org/10.1177/0003603X7401900211
• Subject Matter: Article

ADVERTISING AND COMPETITION IN BANKING:

REPLY

TO COMMENT BY MORTON SCHNABEL

by

FRANKLIN

R.

EDWARDs·

Professor

Schnabel contends in his comment on my study

"Advertising and Competition in Banking" 1

that

I use the

advertising-net income ratio as a proxy for the advertising-

sales ratio (which is the measure of advertising intensity

used in the studies by Telser

and

by Comanor and Wilson).

He

says:

"There

is no a

priori

correspondence between the

advertising-sales ratio and the advertising-net income

ratio

that allows the

latter

to be employed as a suitable proxy

for

the former.

Edwards'

use of the advertising-net income ratio

...

therefore does

not

provide

further

empirical testing of

the hypotheses tested by [Telser and Comanor and

Wilson]." II

I

say:

"total

sales of a bank [is] measured by the bank's

gross income

....

"3To repeat, I use gross income,

and

not

net

income, as Professor Schnabel contends. Could it be

that

Professor Schnabel inadvertently wrote

"net

income" when

he meant "gross income'"

But

then why would the substance

of his comment be focused on the appropriateness of using

the

"ratio

of advertising to profit"T4

Clearly, there must be some misunderstanding. To some

extent Imay have inadvertently contributed to this confusion

by my choice of words. I use "gross income" in my article

as synonymous with "gross revenue" or

"total

operating

revenue." 5

In

other words, by "gross income" I mean to

say

• Associate Professor, Columbia University.

1F. R. Edwards, "Advertising

and

Competition in Banking," The

Antitrust

Bulletin,

Spring

1973,

23-32.

II M. Schnabel, Comment, p. 363.

8Edwards, op. cit., p. 26. See also note 10.

4M. Schnabel, Comment, p. 364.

a See the F.D.I.C.'s Consolidated Report of Income statement.

365