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Detecting important categorical land changes while accounting for persistence

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We now turn to the potential benefits of having a more accurate estimate of Chemical A's true cost. As described above, this requires knowledge of the firm's ability to change its actions in response to better information. If the disposal cost X of Chemical A is revealed to be significant, how might the firm respond? This is a question that hinges primarily on the firm's technological options and the availability of substitute inputs. Substitutes can take a variety of forms. Most obviously, the firm might alter its production process by substituting some other chemical input for Chemical A. But substitutes.