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

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  • Sedjo, Roger

    () (Resources for the Future)

  • Simpson, R. David

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

  • Sedjo, Roger & Simpson, R. David, 1996. "Valuation of Biodiversity for Use in New Product Research in a Model of Sequential Search," Discussion Papers dp-96-27, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-96-27
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-96-27.pdf
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    References listed on IDEAS

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    1. 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.
    2. Morgan, Peter & Manning, Richard, 1985. "Optimal Search," Econometrica, Econometric Society, vol. 53(4), pages 923-944, July.
    3. 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.
    4. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    5. 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.
    6. Sedjo, Roger & Simpson, R. David, 1996. "Investments in Biodiversity Prospecting and Incentives for Conservation," Discussion Papers dp-96-14, Resources For the Future.
    7. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
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    Citations

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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. Simpson, R. David & Craft, Amy, 1996. "The Social Value of Using Biodiversity in New Pharmaceutical Product Research," Discussion Papers dp-96-33, Resources For the Future.
    4. 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.
    5. 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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