ajaz_eco_204_2012_2013_chapter_16_Market_Power

W hy should de beers spend all that money if diamond

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Unformatted text preview: r watertight. The cartel will continue to work only if most producers belong to it, and if most do not cheat. Thanks to a recent deal, the Russians are now back on board, bringing an end to nearly a year during which De Beers, accusing Russia of leaking diamonds, refused to buy their stones at all. But the deal also allows the Russians to sell more of their diamonds on the open market than before. Millions of dollars’ worth of diamonds are still leaking out of Angola. The Australians are now outside the cartel. And, starting next year, Canada will be digging diamonds too. It expects to produce about $300m -400m a year at first, or the same amount (by value) as Australia. There is no guarantee that Canada will sell through De Beers. Should all these rebels desert the fold, the difficulty for De Beers will be less its ability to control prices—it will still extract at least half the world’s diamonds from its African mines, which ooze with the stones—than to justify its costly marketing effort. W hy should De Beers spend all that money if diamond producers o...
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This document was uploaded on 01/19/2014.

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