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Understanding diamond pricing using unconditional quantile regressions

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  • Nicolas G. Vaillant

    ()
    (LEM - Lille - Economie et Management - CNRS : UMR8179 - Université Lille I - Sciences et technologies - Fédération Universitaire et Polytechnique de Lille)

  • François-Charles Wolff

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)

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.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00853384.

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Date of creation: 2013
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Handle: RePEc:hal:wpaper:halshs-00853384

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Related research

Keywords: diamonds; discontinuity in price; hedonic equation; unconditional quantile regressions;

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References

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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. SErgio Firpo & Nicole M. Fortin & Thomas Lemieux, 2006. "Unconditional Quantile Regressions," Textos para discussão 533, Department of Economics PUC-Rio (Brazil).
  3. Narciso, Gaia & Smarzynska Javorcik, Beata, 2008. "Differentiated Products and Evasion of Import Tariffs," CEPR Discussion Papers 6804, C.E.P.R. Discussion Papers.
  4. 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, 04.
  5. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  6. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  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.
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Blog mentions

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  1. The price of diamonds
    by Economic Logician in Economic Logic on 2013-10-04 15:00:00

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