Previous work has argued that young children do not answercounterfactual questions (e.g. “what would have happened?”)by constructing simulations of alternative possibilities in theway adults do. Here, we propose that children can engage insimulation when answering these questions, but considerdifferent counterfactual possibilities than adults. While mostprevious research has relied on narrative stimuli, we use causalperception events, which are understood even in infancy. InExperiment 1, we replicate earlier findings that childrenstruggle with counterfactual reasoning, but show that they arecapable of conducting the required simulations in a predictiontask. In Experiment 2, we use a novel multiple-choice methodthat allows us to study not only when children get it right, butalso how they get it wrong. We find evidence that 4-year-oldsengage in simulation, but preserve only some features of whatactually happened and not others.