The Price of Diamonds Is too High in the Modern Market Essay

Society as a whole has become more and more 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 how these cartels had been influencing the price of the diamonds. Furthermore, the essay will give rise to the economic theories that affect these prices and how the price is controlled in the market.†¦show more content†¦A diamond market with more transparency and greater liquidity eventually led to the end of the Oppenheimer reign in 2011 (Reporter, 2011) It has been recognized that DeBeers is one of the most successful cartels in history. Due to their successful nature, DeBeers has been able to determine the prices of diamonds. DeBeers were considered a monopoly in the market however with smaller firms emerging in the market; DeBeers have lost some of the share in the market. Before the collapse of the empire, DeBeers were considered a dominant firm oligopoly. Parkin says that oligopoly, like monopolistic competition, lies between perfect competition and monopoly. In the diamond trade, the firms in oligopoly produce the same product and compete only on price. Oligopoly is a structure in which only a small number of firms compete (Parkin, 2010). Being the dominant firm oligopoly, the DeBeer cartel has been able to determine the price of diamonds in the market. Owning such a large portion of the market has allowed the DeBeers to be able to bully all the other small firms in order to regulate the price and supply of diamonds. Below is an indication (not the actual diamond price graph) of how a dominant firm, like the DeBeers cartel, was able to set the price of diamonds through their dominance in an oligopolistic market. The graph on the left shows the supply curve, S10, for 10 small competitive firms. The demand curve, D, shows the demand for fuel in 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. 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