When a young couple comes to buy an engagement ring, if you offer them a wide choice, the chance of what they will buy is small

"The sun is the best disinfectant," wrote Louis Brandeis, who later became a judge of the US Supreme Court. With this statement, he outlined the principle of transparency in public systems as a means of corruption.

But the sun can also cause burns and damage all the time. When the transparency of information is used incorrectly, it can harm the interests to which it should serve.

Professor George Akerlof, very famous for his Nobel Prize-winning article, "Market for Lemons" - the uncertainty of quality and the market mechanism "(The Market for 'Lemons' - Quality Uncertainty and the Market Mechanism), revealed serious problems, They hit economic markets, which are characterized by asymmetric information. (Asymmetric information is one of the worst enemies of transparency). Akerlof argues that this kind of information can lead to negative consequences, caused by failures in the market.

For example, suppose that a wine expert wants to make a deal with Joe, who is just an ordinary person who is very fortunate to inherit wealth from a rich uncle. Joe and the wine connoisseur are talking about the price of a barrel of wine that Joe is interested in selling: the vintage Chateau Petrus '98.

If they both only know that the wine is red, they can quickly and successfully strike a deal, because they are equally informed. But if detailed information about vintage wine, vineyard and wine is known only to a connoisseur, Joe may be afraid to sell it, since the information he owns is not equivalent to the information that a wine expert has.

With diamond mines and sources, the situation is more complicated than with diamond manufacturers and site visitors - they are much stronger, because they constitute a large percentage of the market. This shows the unhealthy nature of the problem, since the awareness of the two sides of the transaction is asymmetric. While both sides of any transaction will not have symmetric information, liquidity will decline.

A larger volume will not necessarily be useful if both sides do not have equal volumes and types of information. Symmetric information is the basis for making rational decisions about the purchase and, in general, the healthy nature of the transaction and the market.

Many sightholders and diamond manufacturers are concerned about the lack of information. There is a feeling that the ambiguous situation in which they are forced to work makes it difficult to make the right decisions. Of course, everyone wants to know how much their colleague / rival sold box, but does it serve you well, and does not create a false impression of a lively trade ?!

Is not our curiosity in itself a ricochet for us? This "need to know" and "the need to bring to the general knowledge" provides suppliers with information that does not benefit us. Once a supplier receives this information, he can do more than you (an asymmetric transaction), because then the supplier knows about all the profit margins along the chain.

Paradox of choice - reduction of stocks

First, it is important to understand that the market is currently crowded. When diamonds are thrown into the market in large quantities, neither producers nor diamond sellers can cope with such a large offer. This slows down the movement and the market is overstocked. This problem can be solved only by a significant and urgent reduction of stocks.

Secondly, the issue of choice comes to the fore. American psychologist Barry Schwartz argues in his book: "Why" more "means" less "- the paradox of choice" that the removal of options for consumers can significantly reduce anxiety Buyers.

For example, the company produces a variety of tasty jams and would like to bring its products to the market. If a company exhibits jams with different tastes (at sales points in a supermarket), considering that each buyer can find their favorite taste, the likely result is that the sales volume will be less than if they put only jams with three flavors. As studies have shown, as the number of options increases, our ability to make decisions decreases. Then one of two things happens: our decision does not satisfy us, or we decide not to make a decision.

Now let's compare this example with the world of diamonds. When a young couple comes to buy an engagement ring, if you offer them a wide choice, the chance of what they will buy is small. The bride then feels trapped, that any choice she makes can be better. But it's amazing when a couple is offered no more than two or three options, the decision will be made faster and even accompanied by a broad smile of satisfaction.

Stubborn as an ass - price reduction

"The bitter aftertaste of poor quality persists long after the sweet taste comes from a low price," Benjamin Franklin said wisely.

"Reduction of diamond prices is insignificant if the assortment is also low or consists of small medium sizes," say those whom I interviewed. "Only a gradual steady decline in the prices of fixed sorted diamonds will restore the confidence of sightholders and diamond producers and stability of the market."

In conclusion, let me tell you one funny story I heard a while ago:

The farmer came to the city in search of an ass. He carefully studied what you can choose, and found a young and healthy ass. After exhausting negotiations, he agreed to pay $ 1,000 for the purchase, and the donkey was to be delivered at dawn the next day.

The next day, he came to pick up the donkey and saw that he was dead, and the former owner stated that he had already spent money.

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