Opportunity cost, excess profit, and counterfactual conditionals
Counterfactual conditionals are cognitive tools that we incessantly use during our lives for judgments, evaluations, decisions. Counterfactuals are used for defining concepts as well; an instance of this is attested by the notions of opportunity cost and excess profit, two all-pervasive notions of economics: They are defined by undoing a given scenario and constructing a suitable counterfactual milieu. Focussing on the standard paradigm and Magni’s (2000, 2005, 2006) proposal this paper shows that the formal translation of the counterfactual state is not univocal and that Magni’s model retains formal properties of symmetry, additive coherence, homeomorphism, which correspond to properties of frame-independence, time invariance, completeness. Two introductory studies are also presented to illustrate how people cope with these counterfactuals and ascertain whether either model is seen as more “natural”. A brief discussion of the results obtained is also provided.
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- Carlo Alberto Magni, 2006.
"Zelig and the Art of Measuring Excess Profit,"
Frontiers in Finance and Economics,
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PROYECCIONES FINANCIERAS Y VALORACION
005522, MASTER CONSULTORES.
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- Roberto Ghiselli Ricci & Carlo Alberto Magni, 2009.
"Economic value added and systemic value added: symmetry, aditive coherence and differences in performance,"
PROYECCIONES FINANCIERAS Y VALORACION
005736, MASTER CONSULTORES.
- Roberto Ghiselli Ricci & Carlo Alberto Magni, 2006. "Economic value added and systemic value added: symmetry, additive coherence and differences in performance," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(3), pages 151-154, May.
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- Magni, Carlo Alberto, 2001. "Valore Aggiunto Sistemico: un'alternativa all'EVA quale indice di sovraprofitto periodale," MPRA Paper 7525, University Library of Munich, Germany.
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"Scomposizione di sovraprofitti: Economic Value Added e Valore Aggiunto Sistemico
[Excess-profit decomposition: Economic Value Added and Systemic Value Added]," MPRA Paper 8935, University Library of Munich, Germany.
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