The Price of Diamonds Is Too High Essay - 1215 Words

Introduction This essay supports the statement 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 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†¦show more content†¦The diamond cartel shifts the market equilibrium to the shareholders’ preference – as shown in figure 3. This way a higher profit is made from the sales of diamonds because of the perceived scarc ity. Rhodes was insightful to use the number of wedding engagements as a ballpark figure for the supply of diamonds (Bergenstock and Maskulka: 2001) Graph showing the Relationship between Inelastic Supply and Demand Figure 3: Approximation from Parkin (2013) The diamond cartel has been in existence for over a hundred years. (Spar: 2006) It has faced many issues in order to survive and prosper. (Kretschmer: 1998) Rhodes’ method was sufficient during the early 1900s. (Spar:2006) By 1930, the price of diamonds had fallen and the war was looming; Europeans were not interested in buying diamonds. (Epstein: 1982) It changed ownership to the Oppenheimers around about the Great Depression. Thus began the exploitive marketing tactics of the 20th century. (Epstein: 1982) De Beers’ strong marketing campaign De Beers was aware that the only market where diamonds could sell was in the Unites States of America. Harry Oppenheimer used the American advertising agency N.W. Ayer to change the public’s perception on diamonds.(Epstein: 1982) The campaign used many tactics which included the slogan â€Å"A diamond isShow 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 MoreEssay on The Price of Diamonds Is too High984 Words   |  4 PagesThe 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 willRead 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. 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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