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

Frank Scott, Aaron Yelowitz

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review


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
Title of host publicationThe Global Diamond Industry
Subtitle of host publicationEconomics and Development Volume I
Number of pages24
ISBN (Electronic)9781137537584
StatePublished - Jan 1 2015

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (all)
  • Business, Management and Accounting (all)
  • Social Sciences (all)


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