Essay on The Price of Diamonds Is too High - 984 Words

The Price of Diamonds Is Too High For centuries the diamond has fascinated man for its alluring sparkle and physical hardness. Formed about three billion years ago, the diamond may very well be the oldest and most precious item any person can own. The internationally accepted notion that this commodity is one of the most treasurable commodity of them all has led to the public being prepared to pay the prices that are set by a group of companies in an agreement known as a cartel. This essay will evaluate the diamond market on a microeconomic level and discuss how the diamond cartel came about, what has allowed it to operate for decades, as well as how it determines the price of diamonds. In addition, this essay will, by aid of diagrams†¦show more content†¦In the same light, if the price varied vastly between companies, people would be able to purchase from the company that charges less, resulting in people losing their appreciation of the product. A threat to the company came about in the 1950s when diamonds were discovered in Siberia, and although these diamonds were of a somewhat inferior quality to the ones sold the company De Beers, these cheaper diamonds would lead to a decrease in the quantity of De Beers’ diamonds demanded. Therefore, De Beers bought up almost every diamond from Siberia, meaning that it owned the vast majority of the diamonds of the world. Price fixing and output restriction were the next step to ensure that diamonds do not lose their value to the world. The general law of demand states that the higher the price of a good, the lower the demand. However, the cartel introduced an incentive so that regardless of how high up they decide to push the price of diamonds, there would still be a great demand for them. They developed the marketing strategy of making diamonds synonymous with the idea of love and romance, an idea that is strongly valued by cultures across the globe. As a result, even to present day times, diamonds are considered the ultimate token of love, and any of the other gems of theShow MoreRelatedThe Price of Diamonds is Too High Essays1079 Words   |  5 Pagesâ€Å"THE PRICE OF DIAMONDS IS TOO HIGH† For more than a century the diamond industry has flourished beyond expectations. The diamond has grown from a small yet rare gem stone to that of a rather large and powerful symbol of wealth. The industry has been controlled by one major corporation, De Beers. De beers along with the cartel it set up has built an industry that will last forever. (Spar, 2006) This paper will analyse the diamond industry, paying specific attention to the cartel, how it operates;Read MoreThe Price of Diamonds Is too High Essay1119 Words   |  5 Pagesâ€Å"The price of diamonds is too high† This essay discusses the statement â€Å"the price of diamonds is too high†; it will analyze the diamond cartel and its history in order to determine the validity of this statement. Various microeconomic theories will be discussed and explained, all of which are involved in the diamond cartel. The Oxford Dictionary defines a cartel as â€Å"an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition†Read MoreThe Price of Diamonds Is Too High Essay1215 Words   |  5 Pagesstatement â€Å"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 actuallyRead MoreEssay about The Price of Diamonds Is Too High1177 Words   |  5 PagesStatement: â€Å"The price of diamonds is too high.† The diamond cartel is the most successful and long-lasting cartel in history. The cartel created a scarcity for diamond and stabilized the prices at a high level. This essay will be discussing the validity of the statement with reference to the market of the diamond industry, history of the diamond cartel, how the price of diamonds is determined, and the implications thereof. â€Å"A cartel is a group of firms acting together†¦to limit output, raise prices, and increaseRead MoreThe Price of Diamonds Is too High in the Modern Market Essay1281 Words   |  6 Pagesmore dependent on diamonds as the years go by. From finding this rare gem in the depths of the earths’ crust, to it now being used as a certain love gesture. The rarity of this beautiful gem has changed, however has the price of diamonds changed accordingly with its value (placed upon by society). This essay will effectively argue that the price of diamonds is too high in the market in the present day as a result of various economic factors. The essay will give information on diamond cartels and howRead MoreThe Price of Diamonds Is Too High The price of diamonds has been controlled, up until recently, by1700 Words   |  7 PagesThe Price of Diamonds Is Too High The price of diamonds has been controlled, up until recently, by cartels. Cartels are formed when suppliers of a particular product or service formally agree not to compete with one another. Cartel agreements usually determine the price, output and supply levels as well as where and to whom the product will be distributed to. De Beers is one of the commonly heard names with regard to diamonds. Up until recently De Beers controlled the diamond industry. It bothRead MoreThe History of the Diamond Cartel and Its Role in Determining the Price of Diamonds1174 Words   |  5 PagesDiamonds have been identified as being precious but expensive gems for many decades. Diamonds were extremely rare, only found in India and Brazil until the late nineteenth century (Vogelsang, 2005: 5). After the discovery of diamonds in South Africa, the diamond industry began to flourish. Diamonds then became very abundant and cheap to produce. In order for the value of diamonds to remain as high as they were during the phase in which they were still rare, a diamond cartel was introduced. A cartelRead MoreShould Diamonds Cost so Much? Essay1132 Words   |  5 PagesDiamonds have long been considered some of the most prized and sought after possessions. They have been perceived as indicators of wealth and romance. The diamond market however; has been one of the most controversial and controlled markets in history run by a cartel â€Å"†¦an association of suppliers with the purpose of maintaining prices at a high level and restricting competition† (Oxford English dictionary) formed to prevent the market from becoming flooded with diamonds from too many suppliers, resultingRead MoreEssay on The DeBeers Diamond Cartel1139 Words   |  5 Pagesdiscovery of diamonds, the precious gem has always remained an item of luxury and great beauty and one that requires a great deal of financial sacrifice in order to acquire. Prices of diamonds have remained relatively stable over the last 100 years while prices of other commodities have fluctuated heavily (Hauser, 2002). Diamonds are a relatively rare commodity which gives them a high value and with the help of De Beer’s advertising campaign, spanning the last six decades, that high value appealRead MorePov Analysis Debeers1219 Words   |  5 PagesPOV ANALYSIS #1 De Beers Diamonds Corrin Wigren 10/10/11 Situation: The De Beers name has always been synonymous with diamonds due largely impart to the fact that in order for anyone to deal in the diamond business, at some point they will have to deal with at least one of our subsidiary companies, retailers or distributors. De Beers owns 43% of the worlds’ market shares of rough diamonds, but this is way down from the 80% we were at in the 80’s. The diamond demand is at the mercy of an