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Understanding diamond pricing using unconditional quantile regressions

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  • Nicolas G. Vaillant

    () (LEM - Lille - Economie et Management - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • François-Charles Wolff

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes)

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 G. Vaillant & François-Charles Wolff, 2013. "Understanding diamond pricing using unconditional quantile regressions," Working Papers halshs-00853384, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00853384
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00853384
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    References listed on IDEAS

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    1. 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.
    2. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, May.
    3. 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.
    4. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    5. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    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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    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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    1. repec:spr:annopr:v:244:y:2016:i:2:d:10.1007_s10479-016-2160-1 is not listed on IDEAS

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    Keywords

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

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