Should Diamonds Cost so Much? Essay

1132 Words5 Pages
Diamonds 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 “…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, resulting in a price drop.

This essay will argue for the statement that the price of diamonds is too high. It will analyse the diamond market as well as De Beers control over the diamond market and explain how the diamond cartel managed to gain
…show more content…
Then in 1929 he gained control of De Beers and controlled virtually the whole of the South African diamond trade. (Spar,2006) The diamond syndicate worked by limiting the supply of diamonds entering the market. Agreements were set up whereby distributors would buy their diamonds solely from De Beers and would sell them in agreed-upon quantities at agreed upon prices .De Beers would then stockpile any excess of diamonds from the mines. (Spar, 2006). Once Oppenheimer was in control, he introduced a new structure called the Central Selling Organization (CSO). As illustrated in figure 1, ten times a year a handpicked group of dealers, known as “sightholders”, would meet at the CSO warehouse in London to purchase diamonds. The diamonds were sold at non-negotiable prices. Each sightholder received a different package determined by the quantity and type that De Beers wanted to place in the market and what the sightholder wanted to sell in the coming weeks. There were mutual interests by all parties – keep the price of diamonds high and maximize profits – and so the system worked. If a firm wanted to be independent from De Beers, they risked plummeting the diamond price from over-supply in the market. (Kretschme,1998)

With De Beers controlling the quantity of diamonds entering the market, the price ,as well as controlling any surplus, De Beers

More about Should Diamonds Cost so Much? Essay

Get Access