De Beers Succeed in Accruing the Desired Benefits Through Cartel?
De Beers succeed in accruing the desired benefits through cartel?
Yes. De Beers Succeed in accruing the desired benefits through cartel.
De Beers diamond company, which controls the market for diamonds around the world, causing an artificially inflated price. De Beers has been criticized for its practices, and several governments have attempted to undermine the company's stranglehold on global diamond supplies, without success.
De Beers was successful in formation of cartel by controling the majority of diamond raw material suppliers(it was successful in bringing them together and on agreement). Because of this cartel formation for @ 100 years De Beers enjoyed control of price and quality and quantity of diamonds.It was immensely benefitted in terms of profits and clear demarcation of markets based on high quality,medium quality and low quality.Thus we can say because of cartel De Beers enjoyed,
High market share of 90% in diamonds business.
There was price stability (CSO was the sole supplier of rough diamonds)
Very clear market demarcation (New York/Antwerp – High quality, Johannesburg/Tel Aviv – Medium quality, Bombay – Low quality) no cross-selling, so sustained & guaranteed profits
The above benefits are classic examples of the gains made by De Beers by forming a cartel. But these benefits could only be sustained till the late 90’s by when a chain of events led to the dismantling of the old order and re-alignment of the business and partial dismantlement of the cartel.
Courtesy: http://en.wikipedia.org/wiki/Market_structure,http://www.britannica.com/EBchecked/topic/97205/cartel
Thus if you see De Beers definitely got help from cartel formation.But there is one flaw in cartel business-once an agressive and innovative competition arises the cartel is generally not prepared to take it head-on and the same thing happened with rise of Lev Leviev.
Conclusion
Game theory suggests that cartels are inherently
Yes. De Beers Succeed in accruing the desired benefits through cartel.
De Beers diamond company, which controls the market for diamonds around the world, causing an artificially inflated price. De Beers has been criticized for its practices, and several governments have attempted to undermine the company's stranglehold on global diamond supplies, without success.
De Beers was successful in formation of cartel by controling the majority of diamond raw material suppliers(it was successful in bringing them together and on agreement). Because of this cartel formation for @ 100 years De Beers enjoyed control of price and quality and quantity of diamonds.It was immensely benefitted in terms of profits and clear demarcation of markets based on high quality,medium quality and low quality.Thus we can say because of cartel De Beers enjoyed,
High market share of 90% in diamonds business.
There was price stability (CSO was the sole supplier of rough diamonds)
Very clear market demarcation (New York/Antwerp – High quality, Johannesburg/Tel Aviv – Medium quality, Bombay – Low quality) no cross-selling, so sustained & guaranteed profits
The above benefits are classic examples of the gains made by De Beers by forming a cartel. But these benefits could only be sustained till the late 90’s by when a chain of events led to the dismantling of the old order and re-alignment of the business and partial dismantlement of the cartel.
Courtesy: http://en.wikipedia.org/wiki/Market_structure,http://www.britannica.com/EBchecked/topic/97205/cartel
Thus if you see De Beers definitely got help from cartel formation.But there is one flaw in cartel business-once an agressive and innovative competition arises the cartel is generally not prepared to take it head-on and the same thing happened with rise of Lev Leviev.
Conclusion
Game theory suggests that cartels are inherently