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Understanding Diamond Pricing Using Unconditional Quantile Regressions

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  • Nicolas Vaillant
  • François-Charles Wolff

Abstract

This paper investigates the relationship between the selling price of diamonds and their weight in carats. For this purpose, we use a unique sample of 112,080 certified diamonds collected from www.info-diamond.com during the first week of July 2011. We find substantial differences in pricing depending on cut shape. The price of diamonds increases markedly with the carat weight, with a price elasticity equal to 1.94. However, estimates from unconditional quantile regressions show that the price-weight elasticity is not constant since it rises along the price distribution of diamonds. Finally, we observe the existence of significant increases in prices for diamonds featured with round weights compared to gems just below these threshold weights.

Suggested Citation

  • Nicolas Vaillant & François-Charles Wolff, 2013. "Understanding Diamond Pricing Using Unconditional Quantile Regressions," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(11), pages 1540-1561.
    • Handle: RePEc:asi:aeafrj:v:3:y:2013:i:11:p:1540-1561:id:1106
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    References listed on IDEAS

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    1. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    2. Javorcik, Beata S. & Narciso, Gaia, 2008. "Differentiated products and evasion of import tariffs," Journal of International Economics, Elsevier, vol. 76(2), pages 208-222, December.
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    5. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    6. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, May.
    7. David E. Giles, 2011. "Interpreting Dummy Variables in Semi-logarithmic Regression Models: Exact Distributional Results," Econometrics Working Papers 1101, Department of Economics, University of Victoria.
    8. repec:eme:rlec11:s0147-9121(03)22001-x is not listed on IDEAS
    9. 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.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The price of diamonds
      by Economic Logician in Economic Logic on 2013-10-04 20:00:00

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    Cited by:

    1. Vera Jotanovic & Rita Laura D’Ecclesia, 2019. "Do Diamond Stocks Shine Brighter than Diamonds?," JRFM, MDPI, vol. 12(2), pages 1-19, May.
    2. Rita Laura D’Ecclesia & Vera Jotanovic, 2018. "Are diamonds a safe haven?," Review of Managerial Science, Springer, vol. 12(4), pages 937-968, October.
    3. François-Charles Wolff, 2016. "Bargaining powers of buyers and sellers on the online diamond market: a double perspective non-parametric analysis," Annals of Operations Research, Springer, vol. 244(2), pages 697-718, September.

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