De Beers Essay

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[Case Assignment 2 – Forever: De Beers and U.S. Antitrust Law] (Submission Date: 9/5/2013) 1. Who writes the rules of the international diamond market? How are they enforced? Throughout the 20th century, De Beers used its dominant position in the diamond market to manipulate the demand and supply of diamond industry slowly and strategically in the various ways. De Beers have set the price and monopolized the international diamond market. In terms of Nash equilibrium, De Beers had the dominant strategy where there is no unilateral profitable deviation from any of the players involved. In this case, no players in the same market would take a different action as long as the other dominating player remains the same because other players know that they will be worse off. De Beers enforced their market strategy in various ways as following; First, De Beers established the De Beers Mining Company, and they also purchased all the major South African mines to effectively control the increasing market share of mining diamonds and to manage the quantity of various qualified diamonds. Second, De Beers convinced the independent producers to join their single channel monopoly and to make the shady agreement. They formed the Diamond Cartel so that they could collaborate with the multiple firms in the same field. This strategy eventually led De Beers to be on the dominant position for conspiring, raising, fixing and controlling the prices of diamonds. After having settled the full prevailing power over diamond production, the formalized Diamond Syndicates made all the merchants to purchase diamond from De Beers at fixed quantities and the prices. Third, by regulating the international diamond cartel, De Beers successfully set the scarce image of diamonds and started to stockpile the excess diamonds that were produced and manufactured from other countries and
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