Is it true that the price of diamonds is based on a monopoly?
"Yes, the De Beers Group of Companies is a diamond cartel that had complete control of the diamond market for most of the 20th century. They still control a sizable portion of the market and their effort at marketing (particularly with the slogan ""A Diamond is Forever"") has done much to inflate the market for diamonds in our society. The intrinsic value of diamonds is much lower than the market prices currently reflect, but with the caveat that there is a rarity factor which does drive up the price of larger diamonds. The larger the diamond, the more likely it is to have flaws, so when it comes to diamonds that are 5 carats or greater, you are not as likely to see a new supply of diamonds disrupt the prices of those larger stones. Some other ways that high end jewelers and suppliers are differentiating themselves is by patenting a specific cut that they design. This is another barrier to entry that works to create some artificial price inflation. One common example is the Lucida cut sometimes referred to as the Tiffany cut. Diamonds can also be manufactured. The same carbon structure can be grown in a lab. These stones have the same carbon structure as natural diamonds but without the flaws and visible impurities. Most manufactured diamonds are used industrially, but processes have improved sufficiently to allow for gemstone quality synthetic diamonds. They sell at a decent discount, so that might be an option to consider if you want a substitute. In the years to come, you can expect prices for synthetic diamonds to continue to decrease which will probably put some further downward pressure on jewelers' prices." diamonds are intrinsically worthless -- and therefore have quite little resale value It may be true that De Beers has a near monopoly on diamond supply, but they are still a scarce resource, so their supply is still very limited.  They do have resale value - that's one reason why diamond jewelry is stolen so often. There's just not a huge secondary market for diamonds that I know of (unlike cars, for example).  You can sell diamond jewelry at pawn shops or online brokers, but you probably only get a fraction of their retail value. They are not intrinsically worthless.  They do have value in the industrial sector as powerful cutters, although synthetic diamonds are much more prevalent in this market.  Their value in industry is much lower than their worth as jewelry. Think about gold - it does not have a monopolic supplier but it still has a relatively very high value. De Beers is the company most cited as the near monopoly. They used to own a massive chunk of the diamond supply and intentionally restricted that supply to increase the price. In recent decades, new sources of diamonds have reduced the De Beers' singular grip. They still have a large share though. Video about this from Adam Ruins Everything: https://www.youtube.com/watch?v=N5kWu1ifBGU it turns out this ancient tradition [of giving diamonds rings for engagements] was invented less than a century ago by the De Beers Diamond Corporation... in 1938, the De Beers Diamond cartel launched a massive ad campaign, claiming that the only way for a real man to show his love is with an expensive hunk of crystallized carbon, and we bought that shit. It continues The only reason diamonds are even expensive is that De Beers has a global monopoly on diamond mining and they artificially restrict the supply, to jack the prices up. Because of this artificial supply restriction, the resale value of diamonds are quite low. "diamonds are intrinsically worthless this is simply wrong. (1) Diamonds that are sold for anything less than, oh, let's say $5000 at original retail - are indeed utterly, totally, completely worthless. It is simply ""one of the great scams"". Their real ""price"" is maybe ""five bucks"". End of story. There is no secondary market.  Literally - ""end of story"". If you buy a ""diamond"" lol for ""$2000"" to impress your loved one, you can not then ""sell it"" for any amount of money.  It is: worthless. Once again: simple, undeniable fact. the diamond you bought for 2 grand cannot be resold. Ir's worthless. (OK, maybe you can get 100 bucks for it, something like that. Or, you can scam someone clueless, and get 200 bucks.) (2) However actual ""investment"" stones do in fact have a value - if somewhat fragile. Example, a few years ago I sold a stone for 30 thousand. That was a ""real"" price and it was quite liquid - I was within days able to find a buyer. (A dealer - he would have then sold it on for 35 or whatever.) I have never dealt in stones over six figures, but I'm fairly certain those are ""real"" valuable objects: just like paintings by name artists. (However: yes, the line between ""laughable diamonds"" and actual investment stones, is indeed moving ever upwards.) (Note - the ""elephant in the room"" with diamonds is that GE's industrial process for simply making utterly flawless diamonds, starting with carbon, is getting better every decade.) (A second overwheleming point that nobody has mentioned: diamonds get beat-up.  Regarding ""engagement ring diamonds"", a used one is exactly as useless as a used car.  It's crap.  Just as with $200,000 picassos, this concept does not apply to ""actual investment stones"".) Note that many of the comments/arguments on this page are very confused because: people are not distinguishing between the (ROFL) ""engagement ring scam market"" and the rarefied ""investment gem market"". The two things are utterly different. Yes, ""engagement ring diamonds"" are an utter scam, and are simply: ""worthless"".  The fundamental, basic, overwhelming scam in today's business/social universe is: ""engagement diamonds"". Yes, the price is only due to marketing/monopolies etc. Elephant in the room A: GE's technology can - end of story - manufacture diamonds.  (Starting with ""pencil leads"".)  End of story.  It's all over. Elephant in the room B: folks forget that diamonds get beat-up, they are just like used cars. Regarding ""engagement-ring diamonds"", nobody has ever, or will ever, bought a used one. Simple, utterly undeniable fact: regarding ""engagement ring diamonds"". they have: zero value.  You cannot resell them. End of story. If you buy a house, you can resell it. If you buy a car, you can resell it (at a spectacular loss). If you buy a picasso, you can resell it (almost always making a huge profit). If you buy an ""engagement ring diamond"", it is worth: nothing. Zero. Nada. strictly regarding investment stones, which is a distinctly utterly different market.  This market has no connection, in any way, at all, even vaguely, it is utterly unrelated, to ""engagement ring diamonds"".  You can in fact buy and sell these items - very much like say ""art"" or ""mid century antiques"", and make money. This market just has utterly no connection to the whole ""engagement ring diamonds"" scam system. Say you buy wine at the supermarket, for 5 to 100 bucks a bottle. If you think that the ""wine"" thus bought, has a secondary market, or you can invest in it or something: you have lost your mind. In total contrast: Yes, although totally flakey, there is indeed an ""investment wine market"" which is real and reasonable. I for example have made some money in that. (I have a great anecdote even - I had one cellar of wine in burgundy, which could have been sold for, say, 30 grand - but we drank it  :)  ) Again, the (somewhat bizarre) actual market in investment wine, just has to ""buying wine in the supermarket"".  To further the analogy: wine prices in the supermarket / your (ROFL) wine dealer, from 5 to 100 bucks, are just: utterly laughable. Utterly. Laughable. Much as folks sit around, and decide on ""label designs"", they sit around, and decide on ""price points"". There is, utterly, no difference between $5 and $100 grape juice rofl ""wine"". The price difference is simply a marketing decision: at best, you can think of it as a Velbin good. ... exactly the same applies to ""engagement ring diamonds""."
I wonder if there will actually be a two-way debate on this.  Discriminatory pricing is a tried-and-true financial and economic concept that is widely employed to great success across the globe.  Even utilities have variable pricing based on needs and demand.  Net neutrality is actually a threat to one main subset of the economy:  The free content model.  If your business model does not account for the cost to deliver your content, and instead relies on free distribution, then it's the business model that is questionable - not the model of distribution for cost.  Something to think about.  I welcome a debate here. "You just listed problems with our present form of government. You don't like our present form of government. That's different than saying all government is bad or that we can live well without a government.  If there is a monopoly, or a corporation that has many monopolies, it is very hard for a competitor to challenge it. This is especially true where the ""barrier to entry"" is large, such as utilities, phone companies, car companies, etc. In addition to the fair barriers to entry, it is easy for monopolies to do unfair things to prevent competition. For example, have you ever heard the term ""dumping""?" With direct access to world's finest diamonds, Mervis Diamond offers an amazing array of magnificent diamonds. They specializes in diamond engagement rings, wedding rings, diamond studs, and much more. With their roots at the diamond mines in South Africa, they bring you with direct prices. They are proud to have good quality stones and good quality people in diamond industry. Note: My sister works for one of the largest clinical development, testing, and commercialization companies so I know some of the key issues but not all. This answer does not constitute advice on any particular stock or other instrument. This is mostly well researched opinion. The problem with biotech companies (and a few other areas of technology) is that a lot of money is spent, and debt incurred, on ensuring that products are effective and safe to go to market. At any stage these tests can fail and the product is essentially worthless. At this stage the developers will have learnt a lot about the drug and how it is as efficacious as it is and so the next iteration of the potential drug will be better and hopefully less likely to cause complications and harmful side effects. The process of gaining approval for this second iteration is just as expensive, if not more so, than the last. This means that they are spending a lot of money on the drug and, for small biotech companies concentrating on one or few drugs, will have little to no income generation to offset this. If the money runs out before they get the product out they are bankrupt even if the drug is perfect. A second issue is that they are not the only firm looking for a cure. They might have a very good drug that works very well but another company may have a better one in the pipeline that will either take their monopoly position or take all of their business based on the relative cost and efficacy. The longer it takes them to get through testing, the more likely it is that this will happen and the more likely it is that the competing drug will be first to market and receive all of the free publicity that goes with that. In this case the risk is that they have a product (eventually) but no market for it and so will again run out of money. Another consideration is what the cure is actually worth. Prevention and awareness is already reducing the number of (wealthy) western people who have HIV and so the market size is falling where the most profit can be made. In order to get any return on your investment a profit will be required. Where HIV rates are rising is in poor countries in Africa, Asia, and south America where the price at which people could afford to buy a cure is likely to be lower than even the break even price for the firm. In this case you have a monopoly and a drug that works but no one can afford to buy it for a price that you can accept and still make a profit. Biotech is a very risky, but potentially lucrative, area because there are just so many risks at every stage. Price volatility occurs on rumour and questionable statements from the company (who are always trying to be positive so that their funding doesn't dry up) and even relatively small trades can move the market a large amount as few people want to sell an investment with so much potential. There are also some charged political positions with regard to HIV and AIDS, so a shift in political power could also derail a biotech firm that is researching this kind of drug. I wrote a simple monopoly simulation a few years back. The simulation handicapped one player for a set number of turns and then released the handicap eventually. Long story short, the initially handicapped player almost never recovered except when I handocapped the other players, bonussed the initially handicapped player and they had lucky turns. I ran this simulation tens of thousands of times.  The reality is that there is a strong deterministic element to social and economic structures from generation to generation which require exceptional policy interventions or extraordinary players/people to overcome. I know nothing about mining. Is it possible that technological improvements can lead to over supply? Or are you determined that even with this much craze, that it's production will be held relatively constant.  I'd also like to point out, that maybe only King Midas has ever enjoyed owning gold. "To add to Jason's answer; a further mechanism is that of monopoly rents which you mention in your question.  Movie theatres are often in shopping complexes (which themselves may offer a particular cinema exclusivity), or physically remote from each other, making price comparison more difficult.  Different companies may not offer the same movies (similar to the way phone companies offer difficult-to-compare contract pricing). Once you've paid for your movie ticket, if you're suddenly thirsty or peckish, the theatre is the only place selling snacks.  Many theatres (including film theatres) discourage (or refuse) patrons from consuming products purchased elsewhere on site. A sense of ""capture"" is reinforced with ticket collection at the entrance or some form of barrier (inside vs outside the cordon). A theatre can thus capture their patrons and then leverage that access in order to discriminate amongst the higher-paying consumers mentioned by Jason." Doesn't work as it would be inflationary.  Businesses would raise prices knowing they could get more revenue. This cycles throughout the supply chains which in turn cause prices of other products to increase etc.  And why on earth you wouldn't means test something like this beyond me.