Pricing anomalies in the market for diamonds: Evidence of conformist behavior

Frank Scott, Aaron Yelowitz

Research output: Contribution to journalArticlepeer-review

32 Scopus citations


Some goods are consumed not just for their intrinsic utility but also for the impression their consumption has on others. We analyze the market for such a commodity-diamonds. We collect data on price and other attributes from the inventories of three large online retailers of diamonds. We find that people are willing to pay premiums upward of 18% for a diamond that is one-half carat rather than slightly less than a half carat and between 5% and 10% for a one-carat rather than a slightly less than one-carat stone. Since a major portion of larger gem-quality diamonds are used for engagement rings, such an outcome is consistent with Bernheim's model of conformism, where individuals try to conform to a single standard of behavior that is often established at a focal point. In this case, prospective grooms signal their desirability as a mate by the size of the diamond engagement ring they give their fiancées.

Original languageEnglish
Pages (from-to)353-368
Number of pages16
JournalEconomic Inquiry
Issue number2
StatePublished - Apr 2010

ASJC Scopus subject areas

  • Business, Management and Accounting (all)
  • Economics and Econometrics


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