ajaz_eco_204_2012_2013_chapter_16_Market_Power

In fact the real price of diamonds has been more or

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Unformatted text preview: ts. In whose interest, they repeatedly ask, would it be to destroy the magic? Surely not the jeweller’s, the cutter’s, the dealer’s, or the miner’s. Above all, does not the bride-to-be want the immortal and the incomparable to shine in her ring? The diamond myth lives in a world a bit outside of logic, outside of ordinary economics: a world where there are still a few talismanic substances whose magic rubs off on the bearer. Thus do the s orcerers of Charterhouse Street concoct glamour from carbon, and fool us all. In sum: it took years for DeBeers to cultivate the idea that a man should propose with a diamond ring. To manage the messages that “a diamond is forever” and a sign of love and commitment, it manages prices carefully to ensure that it does not fall below a target lower bound (otherwise the illusion is destroyed) nor, curiously, rise above a target upper bound for then some will hoard diamonds, creating an asset bubble, which when popped – as all bubbles eventually do – will result in a catastrophic drop in prices. In fact, the real price of diamonds has been more or less constant for 82 ECO 204...
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