Why I Study ... the International Diamond Industry

News Image Associate Professor of Business & Economics Donna Bergenstock shares how she became interested in her area of research.

By: Donna Bergenstock, as told to Meghan Kita  Tuesday, April 5, 2022 08:09 AM

As a Ph.D. student in economics, I was looking for a topic for my dissertation. One day I was watching a PBS Frontline documentary on De Beers, which described how De Beers is in this unique position where they control the global supply of diamonds and create worldwide demand for diamonds with their marketing and advertising, which in turn gives the company total control over prices in the international market. It was the perfect topic for what I was interested in researching—economics and marketing.

At that point, Russia had been dumping diamonds onto the market in violation of an agreement they had signed with De Beers. De Beers had been stockpiling diamonds to keep them scarce and keep prices high. I thought perhaps the Russians flooding the market would force De Beers to lower their prices.

I had to try to find information on Russia, which was not exactly forthcoming. And at the time, De Beers was under investigation by our Department of Justice and they weren’t allowed to operate in the United States. It was challenging to find everything I needed to, but eventually I did. I was able to show that what the Russians did, which should have had a pricing effect, was counteracted by all the marketing De Beers did.

I had a couple papers published on the industry—in one, I got into the blood diamond issue that was all over the news. There were horrific stories of genocide and civil wars and groups using diamonds to fund their paramilitary organizations. I researched that as well as the industry’s response: the Kimberley Process, a certification process where supposedly a diamond would have a certificate accompanying it from the moment it was dug out of the ground all the way to the jewelry store saying it’s a “clean” diamond. My latest research looked at: Did consumers care? I found that even a lot of retailers didn’t know about the Kimberley Process and they weren’t talking it up to their customers, and the customers didn’t know much about it either. 

Since then, there have been advances in artificial diamonds. Now, people can buy lab-created diamonds with the same chemical properties of a real diamond but none of the baggage. The industry is making the claim that natural is still preferable, saying, “This diamond’s been here forever; your love is forever.” Meanwhile, millennials and Gen Z aren’t bound by tradition and may not go the diamond route at all. That’s what I’m following and reading about now.