Is Debeers a considered a natural monopoly or just a plain monopoly?
Monday, September 29th, 2008 at
4:20 am
j-man asked:
Did they become a monopoly by having control over the diamond mines? Please explain a natural monopoly in simple terms.
STILLMAN
Did they become a monopoly by having control over the diamond mines? Please explain a natural monopoly in simple terms.
STILLMAN
Tagged with: Control • Debeers • Diamond Mines • Monopoly • Natural Monopoly
Filed under: Diamond Mining
Like this post? Subscribe to my RSS feed and get loads more!
YVONNE
natural monopoly means it would cost too much to have two firms doing same thing. Like drinking water supply – it would cost a ton to build a second network of pipes.
With DeBeers, the monopoly is not natural in the sense that there is no physical reason why any other firm can re-sell the diamons. The only reason people continue bying from deBeers is it’s reputation of honestly stating the quality of its diamonds. Building up such reputation takes time and money, but this is more of an “entry barrier” than natural monopoly situation.