One of the world’s most successful cartels has been the Central Selling Organization (CSO), which controls about threequarters of the world’s diamonds. This collusive oligopoly has kept diamond prices high by restricting supply. The CSO has also promoted the general consumption of diamonds through advertising and marketing. New supplies of diamonds have been found in Canada and Russia. These new mines, which are outside the direct control of the CSO, want to sell their diamonds on the open market.
a. What would you predict will happen in the market for diamonds if these new mines do not cooperate with the cartel?
b. What do you think will happen to CSO diamond advertising?