The value of biodiversity in pharmaceutical research with differentiated products

Biologists and conservation advocates have expressed grave concern over perceived threats to biological diversity. "Biodiversity prospecting'' - the search among naturally occurring organisms for new products of agricultural, industrial, and, particularly, pharmaceutical value - has been advanced as both a mechanism and a motive for conserving biological diversity. Economists and others have attempted to estimate the value of biodiversity for use in new pharmaceutical project research. In this paper we apply a new approach to estimating values: we employ two models of competition among differentiated products. Each model confirms previous findings that the value to private researchers of the "marginal species'' is likely to be small. The models can have very different implications with respect to social values, however. These findings underscore the need for a better understanding of the true meaning of diversity.