PRICING ANOMALIES IN THE MARKET FOR DIAMONDS: EVIDENCE OF CONFORMIST BEHAVIOR
"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." ("JEL" A1, D4) Copyright (c) 2009 Western Economic Association International.
Year of publication: |
2010
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Authors: | SCOTT, FRANK ; YELOWITZ, AARON |
Published in: |
Economic Inquiry. - Western Economic Association International - WEAI, ISSN 0095-2583. - Vol. 48.2010, 2, p. 353-368
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Publisher: |
Western Economic Association International - WEAI |
Saved in:
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