IntroductionThis essay supports the statement “The price of diamonds is too high”. Diamonds have always been considered rare. They have been present throughout history as a symbol of wealth and luxury because they were so hard to find. Nowadays, diamonds are mined and found all over the world, but they are sold through a cartel. (Epstein 1982) A cartel limits the supply of a product in order to keep prices high and limit competition. (South African Pocket Oxford Dictionary: 2002) This raises the question of whether diamonds are actually worth their price. This essay focuses on the origins and basic theory of the diamond cartel; the early functioning of the cartel; De Beers' strong market campaign; determine the current economic benefits of De Beers and the true value of diamonds. Origins of the Diamond Cartel The diamond cartel began in 1888, shortly after shareholders in the diamond mining industry discovered that diamonds were abundant in South Africa. Shareholders realized that the value of the diamonds would be low and they were worried about their investments. To combat this problem, Cecil John Rhodes established De Beers Consolidated Mines Limited to regulate the supply of diamonds. The idea behind De Beers was to transfer all the diamond mining power to a single entity. (Kretschmer: 1998) Nevertheless, De Beers operated under different names such as “The Syndicate”, “Diamond Trading Company” and “Central Selling Organization”. It was about changing the perception that De Beers was a monopoly; which was actually the case. (Epstein 1982) Fundamental Theory of the Diamond Cartel Rhodes was aware of the basic laws of supply and demand. (Spar 2006) Figure 1 shows the supply and demand of a market when there is no cha...... middle of document ......Economic Perspectives. 20(3), pp. 195-208KRETSCHMER, T. and CABRAL, L. 1998. De Beers and beyond: The story of the international diamond cartel. London Business School Case Study pp. 1-7ZIMNISKY, P. 2013. A diamond market no longer controlled by De Beers. Commentary by Kitco [Online]. [Accessed April 20, 2014] Available at: http://www.kitco.com/ind/Zimnisky/2013-06-06-A-Diamond-Market-No-Longer-Controlled-By-De-Beers.htmlKREMKOW, C 2009. Marking of jewelry under test. JCK Magazine. [Online]. October 2009. [Accessed April 20, 2014] Available at: http://www.jckonline.com/article/356103-Jewelry_Markup_On_Trial.phpSRINIVAS, NN 2013. Diamonds are still forever, but precious stones are catching up. Economic times. [Online] [Accessed April 20, 2014] Available at: http://articles.nomictimes.indiatimes.com/2013-02-16/news/37133129_1_largest-diamond-colored-stones-carat