Counterfactuals and the analysis of necessity boris kment this paper is, in part, a straightforward exercise in philosophical analysis. Before this is accomplished, three things should be mentioned. I then brie y discuss its relationship to other axiomatizations lewis gave. In most cases4, it will involve comparing what is likely to happen post merger, with the current position the. Christopher taber wisconsin estimation of policy counterfactuals july 20, 2016 16 81 structural and reduced form models the roy model.
An empirical investigation into the effects of quantitative easing this paper is concerned with ex ante and counterfactual analyses in the case of ex post macroeconometric applications where a single unit is observed before and after a given policy intervention. The counterfactual analysis in eu merger control by damien. Slc v legalism apec workshop on merger control regimes. Counterfactuals are what ifs, thought experiments, gedankenexperimenten, alternatives to actual.
The results obtained using this approach, largely in the united states but also in canada, show that corporate takeovers generally have favourable consequences for shareholders. The concept of the closest possible world, or the smallest change to the world that can be made to obtain a desirable outcome, is key throughout the discussion of counterfactuals. Imagine the ecb had not raised its interest rate target in 2008 and 2011, but had lowered it. Counterfactuals and explanation boris kment on the received view, counterfactuals are analyzed using the concept of closeness between possible worlds. The prediction of successful corporate takeovers the purpose of this section is to use the information implicit in the arbitrageurs decisionmaking process to estimate the likelihood that a cash tender or ex change offer will eventually be accepted. A critique on counterfactual assessments concentrations1ordinarily referred to as mergers andor acquisitionsare strategies employed by business entities to combine resources to streamline their operations, to expand their reach in the market or simply to corner trade opportunities. Counterfactual causality and empirical research in. Counterfactual analysis of bank mergers springerlink.
Stock markets seem to take a positive view of announcements that corporations will be merged or taken over. As pointed out in the horizontal merger guidelines, in order to evaluate the effects of the transaction the commission conducts a counterfactual analysis by comparing the competitive conditions that would result from the notified merger with the conditions that would have prevailed without the merger. Understanding counterfactuals, understanding causation. Important to make the distinction betweenimpactand.
We will then demon strate this procedure on an example where the rela tionships among observed variables are deterministic, followed by an example that demonstrates how excep tions and disturbances incorporated into the model af. A 5counterfactual is a test for causation in philosophy dating back to at least david hume. The first part investigates the merger in the shortterm, while the second part investigates the longterm effects of the merger exploring the relative. Counterfactuals and policy analysis in structural models. These counterfactuals are of the form if a were the case pr c would be x, where the counterfactual is an ordinary wouldcounterfactual, interpreted according to the semantics above, and the pr operator is a probability operator with narrow scope confined to the consequent of the counterfactual. Lewis, david, counterfactuals and comparative possibility, journal of philosophical logic, 2. The counterfactual method, which can be used to assess the effects of an actual or a hypothetical event, has always played an important role in eu competition law. In this paper, we examine the use of the counterfactual method in eu merger control.
Counterfactuals have played an equally central role in metaphysics and the philosophy of science. Duncan sinclair1 1 barrister at 39 essex street chambers, m. The effect of mergers and acquisitions on the performance of. Econometric analysis and counterfactual studies in the. S it appears that merger expansion was not only a phenomenon of prosperity, but that it was also closely related to the state of the capital market. For a recent collection of essays in philosophy on counterfactuals and causation, see collins, hall, and paul 2004. Risk arbitrage and the prediction of successful corporate.
Oecd competition committee meeting of 21 october 2009. The r package counterfactual implements the methods of chernozhukov et al. Download file to see previous pages however, not all mergers and acquisitions have been allowed to prosper particularly if it is found to prevent, restrict and distort competition and more importantly, if it would create or strengthen dominant position. Therefore, in the failing firm defence, the lack of causality between the merger and any worsening of competitive conditions is at the heart of the analysis. But, if we follow shannons understanding of information, then this is the. Introduction counterfactuals are a hot topic in economics today, at least among economists concerned with methodology. Usually the counterfactuals on offer are proposed as causal surrogates. The counterfactual analysis in eu merger control request pdf. Christopher taber wisconsin estimation of policy counterfactuals july 20, 2016 16 81 structural and reduced form models the roy model differences between structural and designbased.
In some mergers the status quo may also not be the right comparison and therefore two counterfactuals have to be assessed. The semantics of counterfactuals have interacted with this project in a number of ways. It explains the roles of the cma, the secretary of state, and relevant sectoral regulators. Merger counterfactual the application of the slc test involves a comparison of the prospects for competition with the merger against the competitive situation without the merger. The goal of eu merger control is to prevent transactions that would significantly impede effective competition. The merger took place in mid 1999s and the effect was the alpha bank. Counterfactual analysis consists of evaluating the e ects of such changes. This means in order to assess the truth value of a counterfactual we have to make an assessment about. Multiple counterfactuals are possible, as multiple desirable outcomes can exist, and there may be several ways to achieve any of these outcomes. Christopher taber wisconsin estimation of policy counterfactuals august 14, 2017 27 85. This study investigates the merger effects of two banks. Trustees of princeton university stanford university. Nov 21, 20 as pointed out in the horizontal merger guidelines, in order to evaluate the effects of the transaction the commission conducts a counterfactual analysis by comparing the competitive conditions that would result from the notified merger with the conditions that would have prevailed without the merger.
Christopher taber wisconsin estimation of policy counterfactuals august 14, 2017 16 85 structural and reduced form models the generalized roy model differences between structural and designbased. Mergers or acquisitions are therefore assessed if it would significantly impede effective competition for being anti. Pdf causation, counterfactuals and competitive advantage. Combines pdf files, views them in a browser and downloads. These counterfactuals are more difficult to build because. One philosophical approach to causation sees counterfactual dependence as the key to the explanation of causal facts.
If it had been the case that p, then it would have been the case that q is true at a world w just in case q is true at all the possible pworlds closest to w. Chapter 5 explored the possibilities of generating a theory of causal asymmetry from the connections between causation and agency. Fusionner pdf combiner en ligne vos fichiers pdf gratuitement. Note on the incompleteness of an axiom system in lewis counterfactuals abstract i give a simple proof that an axiomatization of vc given in the original printing of lewis counterfactuals is incomplete. These counterfactuals are relatively easy to establish because they are usually based on the status quo ante. In competition law specifically, the use of counterfactuals in merger control is virtually universal, and universally understood, across the competition law community worldwide3. A useful tool for establishing causal links between antecedents and outcomes is counterfactual thinking, or considerations of what might have been kahneman and miller, 1986, kray et al. Using an algorithm developed in king and zeng 2006a to identify whether counterfactual points are within the convex hull of the. One thought on the abc of counterfactuals richard veryard on may 16, 20 at 8. The graphical approach to causal inference using directed acyclic graphs dags is equivalent to the potential outcomes approach to causal inference. We introduce a counterfactual analysis of banks mergers, combining the premerger equilibrium setting with postmerger environmental characteristics, while accounting for endogenously propagated changes in market structure. Counterfactual theories of causation stanford encyclopedia. E x e c u t i v e s u m m a r y m e r g e r s a s a s t r a t e g y f o r s u c c e s 2 in 88 percent of the mergers, participants felt that the postmerger organization was better off than the acquiring or. The abc of counterfactuals the enlightened economist.
May 20 this workshop focuses on graphical causal models. The effect of mergers and acquisitions on the performance. R software for evaluating counterfactuals whatif will indicate whether a given counterfactual is an extrapolation and therefore risking more model dependence or a safer interpolation. Similar counterfactual fallacy is when some event supposedly costs the economy x million, based on the hours that will now never be worked. The counterfactual analysis of causation became a focus of philosophical debate after the 1973 publication of the late david lewiss groundbreaking paper. According to common judicial standard, judgment in favor of plaintiff should be made if and only if it is more probable than not that the defendants action was the cause for the plaintiffs damage or death.
Counterfactual structure and learning from experience in. Causation, counterfactuals and competitive advantage article pdf available in strategic management journal 3012 december 2009 with 156 reads how we measure reads. Counterfactuals university of california, berkeley. The counterfactual is an analytical tool used in answering the question of whether the merger gives rise to an slc. Lewis, david, counterfactuals and comparative possibility. Ive been out for a run with the dog so feel very virtuous, and of course have the financial times to enjoy. Fusionner pdf combinez des fichiers pdf gratuitement en ligne. Also imagine the ecb began its openended qe program back in 2009.
Counterfactuals stanford encyclopedia of philosophy. Q is true just in case the world most similar to the actual world in which p is true is a world in which q is true. Learning from experience often involves determining the causes of performance shortcomings to identify lessons to improve performance. The cornerstone of the effectsbased approach article in ssrn electronic journal december 2011 with 715 reads how we measure reads. It contains commands to estimate and make inference on quantile e ects constructed from counterfactual distributions. As pointedout in the horizontal merger guidelines, in. The counterfactual model 5 the core of the counterfactual model for observational data analysis is simple. As pointedout in the horizontal merger guidelines, in order to evaluate the. Union merger regulation the eu merger regulation,2 and the relationship between domestic and european merger control systems. Counterfactuals and explanation princeton university. Geradin the counterfactual method in eu competition law. L lewiss theory a causes b if and only if a and b are distinct events and if a were not to occur, then b would not. The cornerstone of the effectsbased approach article in ssrn electronic journal december 2011. Assess the importance of the counterfactual in merger.
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