Some years back, I watched a documentary about diamonds, which I believe was The Diamond Empire. One central point was that diamonds are not particularly rare and high prices were artificially maintained by De Beers, which had a virtual monopoly on diamond production and distribution.
That monopoly is now over. De Beers dumped a lot of its diamond holdings, and no longer is the only big player in the diamond markets. They also recently settled a class action lawsuit related to price fixing in the U.S. So why haven’t diamonds become dirt cheap? Or have they and I just haven’t noticed? (That’s entirely possible since I have never, ever actually bought one.)
Small diamonds, say between 0.01-0.25 ct. are incredibly available in the marketplace the last few years and the wholesale prices have come down, but the retail prices, while coming down, haven’t dropped as fast.
The markups in the jewelry industry are still high which also contributes to still high price levels.
Large diamonds, especially 2.00 ct. and larger, are scarce enough that the supply/demand curve is flat.
I would expect consumer expectations play into it, at least partially. The amount of money paid for a ring is a big part of its cultural value. If somebody pays $200 for an engagement ring they’re going to be thought of as “cheap”*, even if two years ago it would have cost $2000. And let’s face it, most people aren’t professional gem appraisers – the amount the person actually paid for it matters far more than its “actual” value unless they obviously got duped into buying a ring made of pyrite with a plastic gem.
Speaking in generalities, obviously there are cool people who don’t care how much their ring costs as long as its pretty who have cool families who also don’t care that their little girl doesn’t get a hilariously expensive ring as long as she likes it.
If you’ve been selling something for $300 and your customers expect to pay $300, would you drop your prices if your own costs drop? Some would, many wouldn’t.
Yes. It is part of the “demand” side of the equation. There are enough people who demand to pay a high price for a jewel (by being suspicious of the product from anyone who tries to sell for significantly less) that prices remain steady.
Unless it’s from the old family friend Jerry the jeweler, who can get the stones wholesale for you.
Yes, for items with “cachet” and difficult to determine relative quality, it is possible for demand to increase with price increases rather than decrease. I guess I can see how that would be true of diamonds. It must be a windfall for jewelry stores, right? Wholesale prices dropping and retail prices staying flat. It’s a retailer’s dream come true. Next time I’m buying jewelry (probably never), I’m going to try haggling.