How did the CSO control diamond prices?

How did the CSO control diamond prices?

• A. By setting fixed prices in markets
• B. By buying and holding supplies until demand increased
• C. By regulating the amount of polishing output
• D. By imposing export quotas on rough diamonds

Answer: (B)

The key idea is that price stability in the diamond market came from controlling the supply of rough diamonds, not by setting prices directly. The Central Selling Organization (CSO) of De Beers built and held large inventories and deliberately managed when and how much material reached the market. By buying and storing supplies when demand was weak and then releasing those stocks when demand picked up, they kept supply more predictable and damped price swings. This inventory-and-release approach effectively controlled prices over the long term without fixing prices or relying on downstream production limits or export quotas.

The key idea is that price stability in the diamond market came from controlling the supply of rough diamonds, not by setting prices directly. The Central Selling Organization (CSO) of De Beers built and held large inventories and deliberately managed when and how much material reached the market. By buying and storing supplies when demand was weak and then releasing those stocks when demand picked up, they kept supply more predictable and damped price swings. This inventory-and-release approach effectively controlled prices over the long term without fixing prices or relying on downstream production limits or export quotas.