Bargains in the diamond market? How to take advantage from online information

This paper empirically analyses the price of diamonds from different perspectives. The sample data contains detailed information on more than 165,000 diamonds certified by Gemological Institute of America, which can be purchased since July 2016 from a large online diamond supplier. Our empirical analysis allows to extend the classic 4Cs model in several directions as follows: (a) the classical 4Cs model is insufficient in order to explain the price, so that other attributes, such as polishing, symmetry, and fluorescence, must be incorporated to accurately estimate the price of a particular piece; (b) the large sample size allows us to analyse specific price ranges characterized by high market activity; (3) a very detailed analysis has been conducted for round diamonds, incorporating interactions between attributes within the regression model and studying the marginal rates of substitution between diamond weight and alternative characteristics given a certain price. Our model is able to detect diamonds that could constitute a clear market opportunity for buyers. This model can help to select efficient demand options taking advantage of the information available on the website, improving the overall efficiency of exchange in this sector.