ECONOMIC ESSAY – THE PRICE OF DIAMONDS IS TOO HIGH "Diamonds are a Girl's Best Friend", title of the song from the original Broadway production of Gentlemen Prefer Blondes, rendered famously portrayed by Marilyn Monroe in a film of the same name, embodied society's materialistic and aspirational appetite for symbols that represent wealth and status. This essay argues that the brilliance of diamonds is not necessarily what it seems, as it is based on a general misperception that diamonds are a rare and therefore valuable commodity. To determine whether “diamond prices are too high” or not, it is important to understand the history of what determines the price of diamonds. According to Mike Peng in Global Strategy on page 229, it all began when Cecil John Rhodes founded De Beers Mines in South Africa in 1875. Rhodes is said to have realized that, with South Africa then the only significant producer, the supply of diamonds had to be limited and controlled. Diggers or producers had little control over the quality or quantity of their output and buyers or traders had no control over security of supply. According to Peng, "Rhodes' solution was to create a permanent agreement between a single producer and a single buyer in which supply remained low and prices high." (Peng, 2006) Rhodes acquired all the major diamond mines and formed a diamond merchants' association in the 1890s, called the Diamond Syndicate, to which he and other miners sold their diamonds (Peng, 2006). The members acquired the diamonds from the Diamond Syndicate and, in accordance with its rules, sold them in the prescribed quantities and prices. This was the birth of the diamond cartel. Since 1888, De Beers has controlled...... middle of paper...... ed. Australia: Thomson/South-Western, p.229Stocking, GW and Watkins, MW 1948, “Cartels Competition – The Economics of International Controls Business and Government 1”, HeinOnline, 1948.pp.3-4Online Images: Ajediam.com, 2013 . Annual increase in the value of diamonds +14.47%. [image] Available at: http://www.ajediam.com/images/Historical_diamond_prices_graph.JPG [Accessed April 20, 2014].Courses.byui.edu, 2014. No allocative efficiency: P>MC. [image] Available at: https://courses.byui.edu/econ_150/econ_150_old_site/images/8-1_Monopolies_17.jpg [Accessed April 20, 2014].Harpercollege.edu, 2014. Its behavior and results match the model of monopoly described. in Figure 11-4. She sells a limited quantity of diamonds that will bring an “appropriate” monopoly price. [image] Available at: http://www.harpercollege.edu/mhealy/ecogif/monopoly/fig11.4.gif [Accessed April 20. 2014].