“The price of diamonds is too high” Diamonds were discovered in 1867 in the Cape and became the “foundation stone” of the South African economy (Browne, 2012 , Page 29). Cecil Rhodes, among other diggers, came to Kimberly in search of diamonds. In 1880 Rhodes founded his own company called De Beers Consolidated Mining and in 1888 he incorporated a combination of various mining companies into De Beers and controlled the supply of diamonds through his Central Selling Organization (CSO) which acted as an intermediary between the consumer and the producers ( Spar, 2006, Pgs197-198), (Browne, 2012, Pg. 34). In this way, a cartel was born that began a global monopoly on the sale of diamonds (Browne, 2012, Pg. 34). Since the cartel was established, the price of diamonds has been too high. This essay will discuss why the price of diamonds is too high and will do so by examining how the cartel sets the price of diamonds and what the price of diamonds would be in the absence of a cartel. Rhodes had identified two problems within the diamond trade. He realized that if too many diamonds were mined it would threaten scarcity of the stones and the value and demand would decline. The second problem he foresaw was that South African miners would not be able to control their production and would want to sell all the diamonds they had mined. He realized that the only way to solve this problem was to create an organization uniting other mining companies through which De Beers could control diamond production in South Africa (Spar, 2006, 198). In 1902, Rhodes died and soon after Ernest Oppenheimer took control of De Beers and thus began the legacy of the Oppenheimer family and De Beers (Spar, 2006, 198). De Beers contains a... medium of paper. .....ensive, buyers would have the option to purchase diamonds from another company. There would be few/no barriers to entry compared to a monopoly and no firm would have any advantage over the other since prices would be set by the market instead of the CSO (Heakal, 2014, Pg. 1). Through De Beers creating a perception that diamonds are scarce and worth a lot of money, it has become a common belief that a diamond ring is the only acceptable form of engagement ring. However, when looking at the diamond industry, it is clear that diamonds are actually being priced higher than they should be and that more diamonds could be supplied if they were in a competitive market. Therefore, it is not entirely valid to say that diamond rings are the only acceptable form of engagement ring because they are not as scarce and valuable as people perceive them to be..