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A Cartel's Response to Cheating: An Empirical Investigation of the De Beers Diamond Empire

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  • Donna J. Bergenstock
  • Mary E. Deily
  • Larry W. Taylor

Abstract

De Beers is one of the longest lived international cartels in history. But have recent events threatened the diamond pricing structure so carefully developed over the past 100 years? In this paper, we use time series econometric techniques to evaluate the cartel's response to Russian cheating in the 1990s, We find that, despite massive Russian leaks, the cartel held to its long‐term supply management policy of using its inventory to control the flow of rough diamonds into downstream markets. Although the cartel was able to survive the cheating, it remains unclear whether De Beers will continue to rely on its traditional strategy.

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  • Donna J. Bergenstock & Mary E. Deily & Larry W. Taylor, 2006. "A Cartel's Response to Cheating: An Empirical Investigation of the De Beers Diamond Empire," Southern Economic Journal, John Wiley & Sons, vol. 73(1), pages 173-189, July.
    • Handle: RePEc:wly:soecon:v:73:y:2006:i:1:p:173-189
    DOI: 10.1002/j.2325-8012.2006.tb00764.x
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