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Valuation of Biodiversity for Use in New Product Research in a Model of Sequential Search

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  • Simpson, R. David
  • Sedjo, Roger A.

Abstract

We develop a model of search in which a researcher chooses the size of sequential batches of samples to test. While earlier work has considered similar questions, the contribution of this paper is to use the search model to place a value on the marginal research opportunity. The valuation of such opportunities may be of little interest or relevance in many of the contexts in which search models are employed, but we apply our analysis to an area of considerable societal interest: the valuation of biological diversity for use in new product research. While data from which to make inferences are limited, we find that, using plausible estimates of relevant parameters, the value of biodiversity in these applications is negligible.

Suggested Citation

  • Simpson, R. David & Sedjo, Roger A., 1996. "Valuation of Biodiversity for Use in New Product Research in a Model of Sequential Search," Discussion Papers 10618, Resources for the Future.
    • Handle: RePEc:ags:rffdps:10618
    DOI: 10.22004/ag.econ.10618
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    References listed on IDEAS

    as
    1. Benhabib, Jess & Bull, Clive, 1983. "Job Search: The Choice of Intensity," Journal of Political Economy, University of Chicago Press, vol. 91(5), pages 747-764, October.
    2. Polasky Stephen & Solow Andrew R., 1995. "On the Value of a Collection of Species," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 298-303, November.
    3. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G. & Lasagna, Louis, 1991. "Cost of innovation in the pharmaceutical industry," Journal of Health Economics, Elsevier, vol. 10(2), pages 107-142, July.
    4. Sedjo, Roger A. & Simpson, R. David, 1996. "Investments in Biodiversity Prospecting and Incentives for Conservation," Discussion Papers 10821, Resources for the Future.
    5. Morgan, Peter & Manning, Richard, 1985. "Optimal Search," Econometrica, Econometric Society, vol. 53(4), pages 923-944, July.
    6. Sedjo, Roger & Simpson, R. David, 1996. "Investments in Biodiversity Prospecting and Incentives for Conservation," RFF Working Paper Series dp-96-14, Resources for the Future.
    7. Simpson, R David & Sedjo, Roger A & Reid, John W, 1996. "Valuing Biodiversity for Use in Pharmaceutical Research," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 163-185, February.
    8. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69(3), pages 213-213.
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    Cited by:

    1. Amy Craft & R. Simpson, 2001. "The Value of Biodiversity in Pharmaceutical Research with Differentiated Products," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 18(1), pages 1-17, January.
    2. Timo Goeschl & Timothy Swanson, 2003. "On Biology and Technology: The Economics of Managing Biotechnologies," Working Papers 2003.42, Fondazione Eni Enrico Mattei.
    3. Oliver Fromm, 2000. "Ecological Structure and Functions of Biodiversity as Elements of Its Total Economic Value," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 16(3), pages 303-328, July.
    4. Timo Goeschl & Timothy Swanson, 2002. "The Social Value of Biodiversity for R&D," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(4), pages 477-504, August.
    5. Simpson, R. David & Craft, Amy, 1996. "The Social Value of Using Biodiversity in New Pharmaceutical Product Research," RFF Working Paper Series dp-96-33, Resources for the Future.
    6. Kassar, Ilhem & Lasserre, Pierre, 2004. "Species preservation and biodiversity value: a real options approach," Journal of Environmental Economics and Management, Elsevier, vol. 48(2), pages 857-879, September.
    7. Suneetha, M.S. & Chandrakanth, M.G., 2006. "Establishing a multi-stakeholder value index in medicinal plants--an economic study on selected plants in Kerala and Tamilnadu States of India," Ecological Economics, Elsevier, vol. 60(1), pages 36-48, November.

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