“A diamond is forever “(Spar, 2014).These are the famous words that have lead people into believing that diamonds represents love, romance and make the perfect engagement ring and are therefore of high value .This essay will examine the illusion created around the value and price of diamonds by understanding what the diamond cartel is and the important role the diamond cartel played in determining the price of diamonds and will ultimately argue that the price of diamonds is high.
A cartel is a formal agreement between a group of firms , which collectively attempt to control market prices by regulating production.(“cartel”,2014 ). A cartel has a few favorable market characteristics such as maintaining a small number of significant suppliers , rigorous barriers to entry and ensuring few available substitutes (Parkin, 2010).
It began in 1867 with the discovery of diamonds in South Africa, located by the Vaal River. Most of the diamonds lied in deep volcanic pipes ,which forced the miners to work together due to a shortage of resources. As time pasted the mineshafts grew into giant pits causing floods and interrupting the continuation of any work .Soon after , arrived in Kimberly an Englishman called Cecil Rhodes who was a businessman who rented out pumping equipment .After sometime he soon realized he was within realm of great possibility ,so much that he reinvested the proceedings from rental in acquiring claim of mines .
As time went on Rhodes realized the increase in