A Geometric Treatment of Averch-Johnson's Behavior of the Firm Model: Reply.

This article presents the author's reply to a critique of his study on the relationship between the rate of return to stockholders and the returns earned from equity capital. The author stated that Robert Stonebraker argues that a model of the regulated firm should have management trying to maximize stockholders' total return. According to the author if one accepts Stonebraker's model it is clearly untenable to make assumption that the firm is guaranteed with earnings at an allowed rate. The author implies that without empirical studies, a profit maximand, an E/S maximand and rate of return maximand does not accurately describe the regulated firm.