Opportunity cost, excess profit, and counterfactual conditionals

Carlo Alberto Magni

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: Opportunity cost; excess profit; residual income; counterfactual; modelling; frame-independence; time invariance; completeness (search for similar items in EconPapers)
JEL-codes: A12 D46 G00 G11 G3 M21 M41 (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://mpra.ub.uni-muenchen.de/5695/1/MPRA_paper_5695.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/9304/1/MPRA_paper_9304.pdf revised version (application/pdf)

Related works:
Journal Article: Opportunity Cost, Excess Profit, and Counterfactual Conditionals (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:5695

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