The Price of Diamonds Is Too High

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Introduction This essay supports the statement “The price of diamonds is too high”. Diamonds have always been presumed to be rare. They have been present in history as a symbol of wealth and luxury as they were so difficult to find. Nowadays diamonds are mined and are found all over the world but they are sold through a cartel. (Epstein 1982) A cartel limits the supply of a product in order to keep prices high and to limit competition. (South African Pocket Oxford Dictionary: 2002) This raises the question of whether diamonds are actually worth their price. This essay focuses on the origins and the basic theory behind the diamond cartel; the early operation of the cartel; De Beers’ strong market campaign; determining De Beers’ current economic benefit and the true worth of diamonds. Origins of diamond cartel The diamond cartel began in 1888 shortly after shareholders in the diamond mining industry found out that diamonds were abundant in South Africa. The shareholders realized that the value of diamonds would be little and they were concerned about their investments. In order to combat this problem, Cecil John Rhodes created De Beers Consolidated Mines Limited so that the supply of diamonds would be regulated. The idea behind De Beers was to shift all the diamond mining power behind one entity. (Kretschmer: 1998) Nevertheless De Beers operated through different names such as “The Syndicate”, “Diamond Trading Company” and “Central Selling Organization”. This was to shift perception that De Beers was a monopoly; which in reality it was. (Epstein 1982) Basic theory behind diamond cartel Rhodes was aware of the basic laws in supply and demand. (Spar 2006) Figure 1 demonstrates the supply and demand of a market when there are no cha... ... middle of paper ... ...onomic Perspectives. 20(3), pp. 195-208 KRETSCHMER, T. and CABRAL, L. 1998. De Beers and Beyond: The History of the International Diamond Cartel. London Business School Case Study pp. 1-7 ZIMNISKY, P. 2013. A Diamond Market No Longer Controlled By De Beers. Kitco Commentary [Online]. [Accessed 20 April 2014] Available from: http://www.kitco.com/ind/Zimnisky/2013-06-06-A-Diamond-Market-No-Longer-Controlled-By-De-Beers.html KREMKOW, C. 2009. Jewelry Markup on Trial. JCK Magazine. [Online]. October 2009. [Accessed 20 April 2014] Available from: http://www.jckonline.com/article/356103-Jewelry_Markup_On_Trial.php SRINIVAS, N. N. 2013. Diamonds are still forever, but gems are catching up. The Economic Times. [Online] [Accessed 20 April 2014] Available from: http://articles.economictimes.indiatimes.com/2013-02-16/news/37133129_1_largest-diamond-coloured-stones-carat
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