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Marketplace Morning Report
Freakonomics Radio

Diamonds: pricey, but not valuable

Kai Ryssdal Apr 15, 2015
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Jason and Kristen Sarata won a diamond at a charity raffle, but when the couple couldn’t agree on whether to sell the diamond or not, Jason hid it in the laundry room.

“The diamond became part of this vast repository of what I’ve learned is known as the overhang,” says “Freakonomics” author Stephen Dubner.  

According to diamond expert Edward Jay Epstein, “The overhang is every diamond ever sold in history that is on someone’s finger or in a bank vault, or in some drawer somewhere.”

Dubner says when people stash away their prized diamonds, it makes them more valuable. “All those unsold diamonds that people keep because they think of them as investments makes them valuable because they are constricted,” he says.

And the common belief that diamonds are inherently valuable? It’s just not true.

“[The diamond industry has] kept prices high over the years by constricting demand, kind of matching demand to the number of engagements, for instance, for engagement rings,” Dubner says.

In fact, reselling a diamond for top dollar isn’t all that easy. “The markup from a jeweler is huge, so you can’t expect to get all that much if you sell it back to a jeweler and you don’t have that many choices. It’s what economists call a thin market.”

Which is why the Saratas have decided to skip over the middleman and sell their diamond on eBay (they’ll also donate fifty percent of the sale back to the charity they won the jewel from).

“If you know anybody that wants to buy a diamond, not just any diamond, a diamond that was won at a raffle and fought over and hid in a laundry room and fought over some more, head over to eBay and search for ‘Freakonomics Charity Diamond,’” Dubner says.

Two pairs are better than one!

For a limited time, you can get BOTH new Marketplace Sock designs for only $5/month.

Don’t wait – this special offer ends soon!