Nguyen Van Quyen

Corruption in Public Procurement Market

The paper presents a model of public procurement in which the contracting officer is corrupt and extracts bribes from the bidding firms. The firms submit multidimensional bids, which consist of the quality and the price of the project that they propose to realize. The firms differ in their costs of realizing the project at a given quality, and these costs are private information. The contracting official, in exchange for a bribe, abuses the power of his or her public office by distorting the quality ranking of the bids and by giving the favoured firm an opportunity to readjust its bid to undercut its rivals. Our analysis suggests that when the firms serve only the internal market, the public project is realized at low quality and inflated prices. However, when the firms are also allowed to sell the product they develop for the internal market in a foreign market, the auction is ex post efficient.

The Search for New Drugs: A Theory of R&D in the Pharmaceutical Industry

The paper formalizes, in a rigorous manner, the concept of information externalities, by modeling R&D activities as the process of searching for a drug to treat a disease, with R&D activities being modeled from the perspective of the theory of optimal search. In conventional models of patent design, only one brand - the brand with the highest quality - is available on the market at any time. Furthermore, demand is completely inelastic: each consumer, regardless of income and regardless of the price of the brand offered on the market, buys exactly one unit of the brand. In this model, which is a dynamic model in continuous time, several differentiated products - the products whose patents are still in force and the products whose patents have expired - are available at any time on the market. Furthermore, the demand for a brand depends on income, its own price, and the prices of the other brands. The analyses of R&D as well as the impact of the cost and the quality of newly discovered drugs on the market are represented under this framework, when the pharmaceutical firms with an active drug discovery program behave strategically in both R&D and in the product market.

Endogenous Trade Policies in a Developing Economy

This paper examines the formation of trade policy for a small open developing economy where lobbying activities may be carried out to influence policy-making decisions. The paper presents a three-sector economy in which the manufacturing sector can lobby policymakers for favorable policies. Under some plausible conditions, it is demonstrated that lobbying activities carried out by the owners of the specific factor in the manufacturing sector would secure a protectionist trade policy through either an import tariff or an export subsidy. The government also imposes a consumption tax on agricultural products, which further strengthens the protectionist measure applied to the manufacturing sector. In general equilibrium, there will be a movement of labor to the manufacturing sector, an output expansion in the manufacturing sector, and an output contraction in the agricultural sector, exactly as suggested by factual evidence.

Biodiversity Economics: International trade and its impact on biological diversity

Introduction For the past twenty-five years, the world has been moving towards a free trade regime. At the same time the concern for the impact of free trade on natural resources is increasing. There is debate among the environmentalists and the economists on the impact of trade on welfare and biodiversity (see Chapter 18 of this volume). Environmentalists ‘worry that trade will expand the scope of market failures, put added strain on the environment and lead to degradation of natural resource stocks in the long run’ (Karp et al . 2001, p. 617), which in turn will decrease the welfare of both import and export countries. Many economists argue, however, that free trade will improve social welfare and rectify environmental externalities provided markets function efficiently, property rights over biodiversity resources are well defined and non-market values of natural resources are accounted for in the production process. The fact that most of the worlds biodiversity-rich land lies in the populated and poor South makes the situation even worse. The biodiversity-rich South is already overburdened to meet the demand of its own population for biodiversity-derived goods (such as agricultural products, timber and non-timber forest products), while free trade, it is argued, adds further pressure to overuse and overexploit biodiversity resources. Yet as incomes grow in Northern countries, their consumers are displaying an increasingly stronger preference for so-called ‘green products’.

Collapsing Exchange Rate Regime Under Optimal Monetary Control

In this paper, we analyze the problem of optimal domestic credit expansion for a small open economy.

Resource Economics Modelling and the Technique of Optimal Control

This chapter consists of two parts. In the first part, we present the main results of optimal control that we need in this book. In the second part, we provide some historical background for the economics of exhaustible resources and use the tools developed in the first part to obtain the solutions of some problems in this important field of economics.

R & D Timing and Innovation: A Bilateral Resource Monopoly Dynamic Game

In chapter 2 and chapter 3, we have investigated the problem of R & D timing and resource depletion for an economy that possesses both a stock of oil and the capacity to engage in a research program to find an inexhaustible perfect substitute for oil. We have also suggested how the social optimum can be supported by an intertemporal perfectly competitive equilibrium. In this chapter, we look at the problem of R & D timing and resource depletion under an intermediate market structure where the oil stock is owned by one country and the new technology by another country.

R & D Timing, Innovation and Resource Depletion Under Uncertainty

Because the earth’s supply of the exhaustible resource in question is finite, the ultimate resource base available for exploitation is necessarily limited. The scarcity that leads to the decision to embark on an exploration program would remain a fundamental problem if it was initially so. In this chapter, we deal with the strategy of finding a perfect substitute for the resource in question. For some time, energy experts have been discussing the possibility of removing forever the constraint of a finite resource based imposed by the earth’s limited stock of fossil fuels. Among the most plausible contenders for large-scale future supplies of energy we might mention solar energy, hydrogen fusion, and breeder fission. The energy supplies from these sources, whenever viable, are virtually unlimited. The strategy we envisage is to start an R&D program to find an inexhaustible perfect substitute, called the backstop, for the resource in question.

Theoretical Resource Exploration Over Space and Time

An ore is merely a rather rare rock type. It consists of one or more valuable metallic minerals mixed with worthless gangue. The grade, i.e., metal content of an ore varies from deposit to deposit. Whether an ore can be mined is a question of costs and metal prices. Mining cost depends to a large extent on the geology of the ore body and its mineralogy, for these largely determine the mining method. Metal price is a function of demand conditions and the rarity of the metal in question.