Case Study

9/17/12 De Beers A Successful cartel « Citizen Economists « why Zoning Law s Are No lasting a Benefit to U.S. Home Buyers Agricultural Markets effective for big Picking » De Beers A Successful Cartel BY BHA GWA D JA L PA RK, ON JULY 12TH, 2008 In my foregoing post, you read active Nash equilibriums and the formation of reliances. You also read virtually how compacts t mop up to be unstable and capable to treachery by its members. This week we testament look at De Beers one of the most happy cartels ever. In fact, it is so successful that it operates completely behind the scenes and has shifted public position to accommodate its intrinsic needs. Simply post, diamonds ar not rargon. They be expensive yes, tho they exist let go ofly on earth. However, standardised any other commodity, they do follow the laws of yield and demand. The supply has been unnaturally constrained so that thither is no proliferation of diamonds in the market. Because of th is, the prices of diamonds are higher than they would be in a free market. So why is the cartel put together and direct by De Beers stable? One would see thought that fit to the laws of plunk for theory, it should have broken apart by a defecting member. there are two reasons for this.

First of all, most of the cartel members have major holdings by De Beers themselves. This means that there are thus far fewer players than it looks. Fewer players makes it less likely that there lead be a defection. Secondly, the real partners of De Beers in the cartel are the Russians. They mine small diamonds from Siberia and channel them through De Beers. The Russians lie with that if they put thei r diamonds directly into the market, the pri! ces will drop. And that will be poor for them in the large run. This brings us to an important point on cartels. The long run. Game theory predicts that if a Prisoners predicament-like game is repeated indefinitely with no end in sight, then the logical outcome, assuming that all participants are intelligent, is...If you motivation to get a full essay, order it on our website: OrderEssay.net

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