How does the diamond industry decide prices?

How does the diamond industry decide prices?
Diamonds are classified and separated by the “4 C’s”: Color, Cut, Clarity, and Carat, which are discussed at length. However, the only thing truly distinguishing diamonds from each other in the eyes of consumers and traders alike is the dollar value. So how is price determined?


In 1978, Martin Rapaport released the first “Rapaport Diamond Report”, a wholesale diamond price list for traders. While much maligned at the time, it has slowly become accepted –price lists are released monthly– and is now a staple of transparency in a once-secretive industry.

Rapaport Diamond Report prices are based on what similarly graded diamonds have traded for in the market recently. The list separates diamonds by certain parameters: Round diamonds, for example, are on a separate list than fancy shapes, as rounds are more valuable (it is usually more difficult to cut a rough diamond into a round-brilliant with 58 facets than to cut a fancy shape).

How are diamond wholesale prices determined?

Size is also of the utmost importance. For example, the price for 1.00-1.99 carat diamonds is lower than 2.00-2.99 carat. Even if a diamond is 1.99 carats, it will be listed at a lower per carat price. After classifying diamonds by shape and size, color and clarity are plotted in a graph-esque manner, with diamond colors along the X-axis and diamond clarities across the Y-axis of the price list.


RAPAPORT Price List, Example:

Example of Rapaport Price List

While the Rapaport Diamond Report is the baseline, the diamond market does not strictly adhere to the price list. So what are the quirks?

For instance, diamond traders will prefer not to choose exact diamond weights, such as “2.00 carats”, because if the stone were to chip for whatever reason and go for a re-cut, the stone would dip below 2 carats and lose a lot of value. Also, since higher colors and clarities are listed for much higher prices on the report, consumers usually make up the difference by choosing better deals. Thus, wholesalers and traders will give less of a discount on certain stones, as the demand remains strong.


For instance, a diamond weighing 1.99 carats will cost less than a 2.01 carat stone. However, the discount from the price list for the 2.01 carat might be -20%, whereas the discount on the 1.99 may be -10%. That's because the 2.00+ carat stones are on another part of the price list and thus command a much higher market price. The 2.01 is worth more – however, exactly how much more is still up to the market, rather than the list. 

“Big face” diamonds with shallow cutting appear larger than their carat weight, so in many cases they will also command a premium. Conversely, diamonds that are “overweight”, or cut too deep, look smaller than their listed weight – for instance, a 6 carat diamond can appear smaller than a 5 carat stone, depending on the length/width/depth measurements.

Lastly, diamonds between 6-10 carats are not listed on the diamond trading price list at all! While 10.00-10.99 carats are also listed, they are mostly there for reference to help dealers understand pricing, as diamonds above 5 carats are realistically too rare to be plotted on wholesale price lists. 

How about the retail markup?

While much has been made of retail markups at jewelry stores, the digital age has made information more accessible than ever and given diamond buyers the transparency they've needed for decades. While large retail shops or jewelry brands still maintain larger markups than local jewelers and online vendors, customers have a vast array of choices and can choose what they value – be it brand value, design, or price consciousness. 

While diamond pricing has neared standardization, it’s clear that market factors are very fluid, meaning that price is not set in stone. The biggest reason for this, however, is that diamonds are not the same! Every diamond – even the ones that are graded the same – is unique, and thus cannot be “priced” in black and white.

While the diamond industry awaits the release of the Rapaport price list every month, it is important to remember that it is the market that sets the list price – not the other way around.