Tuesday, December 24, 2019

Essay about The Price of Diamonds Is Too High - 1177 Words

Statement: 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 increase economic profit.† (Parkin et al., 2013:312) The diamond cartel formed when diamonds were discovered in South Africa. This discovery, in 1870, brought a rush of prospectors to South Africa to search for alluvial diamonds. The search†¦show more content†¦Therefore, the discovery of diamonds resulted in an overall decrease in the price and value of diamonds. Rhodes saw the diamond cartel as a solution to this problem. Rhodes used the cartel to limit the supply of diamonds to the actual demand, thereby stockpiling the excess supply. De Beers not only controlled the market in South Africa, but they also expanded their holdings to other parts of the world, such as, England and Israel. (Epstein, 1982:1) By 1929, when Sir Oppenheimer took control of De Beers, the transition between the actual mining to the distribution, which is controlled by the Central Selling Organizing (CSO), became centrally controlled. (Spar, 2006:197-198) By analysing the definition of monopoly, which â€Å"†¦is the exclusive right of a person, corporation or state to sell a particular commodity† (Lerner, 1934:157), we can deduce that the diamond industry is a single-price monopoly; in other words, De Beers created its own barriers to prevent others from entry by obtaining control of the supply of diamonds (Parkin et al., 2013:273) and selling at the same price to all its customers (Parkin et al., 2013:275). Since by definition, a monopoly consists of one entity, a monopolist has complete control of the supply of the commodity; therefore, it has market power and, thus, has the ability to control the prices. (Parkin et al., 2013:272-273) The same would apply to the diamond industry: De Beers was the only firm that minedShow 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. 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. 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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

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