Topic : Monopoly Pricing

Case: De Beers and the Global Diamond IndustryIVEY 905M40 (HBSP)

Case Questions

1. There is a famous paradox "Water and Diamond" discussed by Adam Smith, Wealth of Nations

(1776) which states that water price is low even if it is necessary for human life, while diamond

price is high eve if it is dispensable. How do you account for the paradox?

2. What are the economic and institutional conditions for luxury business like diamond to be

established?

3. What are the impact of new technology that can produce artificial diamond perfectly fits for

jewelry purpose? Is diamond industry forever to be sustained?