Although historically diamonds were rare. the discovery of South African diamond mines by the end of the 19th century brought an avalanche of stones to the global market. A key reason diamond prices were so expensive was because of the deeply ingrained perception of scarcity. Consequently, if there was an oversupply, prices could plummet. Cecil Rhodes, an English founded the De Beers Mines tycoon who in South Africa in 1875, sought to solve this problem focusing on two areas. First. Rhodes realized by that supply from South Africa, the only significant producer in the world at that time, should be limited. Second, because producers(diggers) had little control over the quality and quantity of their output, they preferred deal with an indiscriminate buyer to willing to purchase both spectacular and mediocre
stones. Since most output would be mediocre stones producers preferred to remove any uncertainty and t be able to sell all of their output. On the other hand, buyers(merchants) needed steady supply of to secure a a stones(both high and low ends) in order to generate sufficient polish and then retail. Rhodes's volume to solution was to create an ongoing agreement between a single producer and single buyer in which supply a was kept low and prices high, Putting his idea in action, Rhodes bought out all the major South African mines in the 1890s and formed a diamond merchants' association in the country, called the"Diamond Syndicate to which he would sell his output. In such"single-channel marketing,'' all of the syndicate pledged to members buy diamonds from Rhodes and sell them in specific quantities and prices. With such an explicit scheme of quantity- and price-fixing, the diamond cartel was born. After Rhodes's death in 1902, the De Beers's empire was strengthened by Ernest Oppenheimer, a German diamond merchant who had founded his own company, Anglo-American, in South Africa. Through cross-shareholdings, members of the Oppenheimer family still control both Becr's and Anglo-American to this day.
Although historically diamonds were rare. the discovery of South African diamond mines by the end of the 19th century brought an avalanche of stones to the global market. A key reason diamond prices were so expensive was because of the deeply ingrained perception of scarcity. Consequently, if there was an oversupply, prices could plummet. Cecil Rhodes, an English founded the De Beers Mines tycoon who in South Africa in 1875, sought to solve this problem focusing on two areas. First. Rhodes realized by that supply from South Africa, the only significant producer in the world at that time, should be limited. Second, because producers(diggers) had little control over the quality and quantity of their output, they preferred deal with an indiscriminate buyer to willing to purchase both spectacular and mediocre
stones. Since most output would be mediocre stones producers preferred to remove any uncertainty and t be able to sell all of their output. On the other hand, buyers(merchants) needed steady supply of to secure a a stones(both high and low ends) in order to generate sufficient polish and then retail. Rhodes's volume to solution was to create an ongoing agreement between a single producer and single buyer in which supply a was kept low and prices high, Putting his idea in action, Rhodes bought out all the major South African mines in the 1890s and formed a diamond merchants' association in the country, called the"Diamond Syndicate to which he would sell his output. In such"single-channel marketing,'' all of the syndicate pledged to members buy diamonds from Rhodes and sell them in specific quantities and prices. With such an explicit scheme of quantity- and price-fixing, the diamond cartel was born. After Rhodes's death in 1902, the De Beers's empire was strengthened by Ernest Oppenheimer, a German diamond merchant who had founded his own company, Anglo-American, in South Africa. Through cross-shareholdings, members of the Oppenheimer family still control both Becr's and Anglo-American to this day.
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