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Markets: Continuity and Change in the International Diamond Market

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  • Debora L. Spar
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    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.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.20.3.195
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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 20 (2006)
    Issue (Month): 3 (Summer)
    Pages: 195-208

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    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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    1. Matthias Vocke & Nienke Oomes, 2003. "Diamond Smuggling and Taxation in Sub-Saharan Africa," IMF Working Papers 03/167, International Monetary Fund.
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    Cited by:
    1. Auer, Benjamin R. & Schuhmacher, Frank, 2013. "Diamonds — A precious new asset?," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 182-189.
    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. Péter Eső & Volker Nocke & Lucy White, 2010. "Competition for scarce resources," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 524-548.
    4. Virginia Haufler, 2009. "The Kimberley Process Certification Scheme: An Innovation in Global Governance and Conflict Prevention," Journal of Business Ethics, Springer, vol. 89(4), pages 403-416, March.
    5. Rigterink, Anouk S., 2011. "Diamonds and violence in Africa. Uncovering relationships and mechanisms," MPRA Paper 45235, University Library of Munich, Germany.
    6. 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.
    7. Renneboog, L.D.R., 2013. "The Returns on Investment Grade Diamonds," Discussion Paper 2013-025, Tilburg University, Center for Economic Research.
    8. 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.

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