In 1866, a child walking along the Orange River in South Africa picked up an odd
ID: 1181495 • Letter: I
Question
In 1866, a child walking along the Orange River in South Africa picked up an odd-looking pebble that turned out to be a 21-carat diamond. That discovery on a farm owned by Johannes De Beers sparked the largest diamond mine in history. When the Great Depression caused a slump in diamond prices, De Beers Consolidated Mines undertook successful efforts to control the world supply of uncut diamonds and to increase consumer demand for cut diamonds. The company was able to increase consumer demand through a carefully tailored marketing program. De Beers spends about $200 million a year trying to convince people that diamonds are scarce, valuable, and perfect reflections of love. De Beers
Explanation / Answer
This product was well suited to monopolization as it didn't have any close substitutes available and it had a demand in the market for which people were willing to pay high money.
De Beers used his monoply position to restrict the supply of the diamonds and as people began thinking it was scarce, it's prices rose and so did the demand in the right circles (namely the rich). He used this to maximize his profits as the demand was increasing while the supply was in his control. As it was a monoplistic market, he was in control to set the price. A monopolist always sets the price to maximize his profits.
Other precious stones like gold and platinum might have been impacted as people started choosing diamonds over them. Complimentary goods like the framework for an ornamnet and related goods good have seen a rise as the diamonds were uncut and for the buyers to properly be able to show them off needed it to be in a presentable manner.