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Markets: Continuity and Change in the International Diamond Market

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  • Debora L. Spar

Abstract

The international diamond cartel, which presides over the production side of the industry, may be the most successful and longest-lasting cartel in the world. The dominant company in the industry, DeBeers, has been around since 1880 and has been controlled by a single South African family, the Oppenheimers, since 1925. Eight countries produce the bulk of the world's gem diamonds, and most of the producing entities within these countries conform to a set of rules. This conformity is the product of over a century of careful planning and negotiation, in which DeBeers has undertaken largely successful efforts to control the diamond trade and maximize its long-term prospects. The past decade has seen the end of apartheid in South Africa, the fall of communism in Russia, the opening of major mines in Canada, and the emergence of a worldwide movement against so-called "blood" or "conflict" diamonds. While, these developments have pummeled the diamond industry and forced its central players -- most notably DeBeers -- to change the nature of their trade, these changes have not affected the core dynamic of the global diamond market. It remains an industry dominated by a single firm and an industry in which, perhaps uniquely, all of the major players understand the extent to which their long-term livelihood depends on the fate and actions of the others.

Suggested Citation

  • Debora L. Spar, 2006. "Markets: Continuity and Change in the International Diamond Market," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 195-208, Summer.
  • Handle: RePEc:aea:jecper:v:20:y:2006:i:3:p:195-208
    Note: DOI: 10.1257/jep.20.3.195
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.20.3.195
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    References listed on IDEAS

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    1. Margaret C. Levenstein & Valerie Y. Suslow, 2002. "What Determines Cartel Success?," UMASS Amherst Economics Working Papers 2002-01, University of Massachusetts Amherst, Department of Economics.
    2. Mr. Matthias Vocke & Nienke Oomes, 2003. "Diamond Smuggling and Taxation in Sub-Saharan Africa," IMF Working Papers 2003/167, International Monetary Fund.
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    Cited by:

    1. Seitz, William Hutchins, 2016. "Stock market reactions to conflict diamond trading restrictions and controversies," Business and Politics, Cambridge University Press, vol. 18(1), pages 63-84, April.
    2. Renneboog, Luc & Spaenjers, Christophe, 2012. "Hard assets: The returns on rare diamonds and gems," Finance Research Letters, Elsevier, vol. 9(4), pages 220-230.
    3. Cyrlene Claasen & Julia Roloff, 2012. "The Link Between Responsibility and Legitimacy: The Case of De Beers in Namibia," Journal of Business Ethics, Springer, vol. 107(3), pages 379-398, May.
    4. Péter Eső & Volker Nocke & Lucy White, 2010. "Competition for scarce resources," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 524-548, September.
    5. Rita Laura D’Ecclesia & Vera Jotanovic, 2018. "Are diamonds a safe haven?," Review of Managerial Science, Springer, vol. 12(4), pages 937-968, October.
    6. Auer, Benjamin R. & Schuhmacher, Frank, 2013. "Diamonds — A precious new asset?," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 182-189.
    7. Renneboog, L.D.R., 2013. "The Returns on Investment Grade Diamonds," Discussion Paper 2013-025, Tilburg University, Center for Economic Research.
    8. Rigterink, Anouk S., 2011. "Diamonds and violence in Africa. Uncovering relationships and mechanisms," MPRA Paper 45235, University Library of Munich, Germany.
    9. Chong, Terence T.L. & Lu, Chenxi & Chan, Wing Hong, 2012. "Long-range dependence in the international diamond market," Economics Letters, Elsevier, vol. 116(3), pages 401-403.
    10. Vera Jotanovic & Rita Laura D’Ecclesia, 2019. "Do Diamond Stocks Shine Brighter than Diamonds?," JRFM, MDPI, vol. 12(2), pages 1-19, May.
    11. Frank Scott & Aaron Yelowitz, 2010. "Pricing Anomalies In The Market For Diamonds: Evidence Of Conformist Behavior," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 353-368, April.
    12. Seitz William Hutchins, 2016. "Stock market reactions to conflict diamond trading restrictions and controversies," Business and Politics, De Gruyter, vol. 18(1), pages 63-84, April.

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