This website uses cookies to ensure you have the best experience.

Diamonds Should You Buy? Essay

630 words - 3 pages

Data Selection (refer to Excel sheets: Scatter1 and Scatter2)
We used Excel to draw a scatter plot to see the relationship between price and carat. The data presented two different groups of data: 1) Diamonds at low prices with low carat and (2) diamonds at high prices with high carat weight. The data with the diamonds at low prices and low carat is irrelevant so we excluded that portion of the data which had prices under \$1000.

Selected data to run the regression
Selected data to run the regression
Cut off point of data at Price = \$1000
Cut off point of data at Price = \$1000

Variable Grouping and Dummy Variable Assignment

The categorical variables: color, clarity, cut, certification, polish, and symmetry were categorized into necessary categories to help simplify the upcoming regression from a very large number of dummy variables.

Then, dummy ...view middle of the document...

1454*1)=\$2,747.91

Semi-Log Model (refer to “Semi-Log” Excel Sheet)
7.3514+0.3412*0.90+0+0+0+0.1815*1+0+0.0420*1+0.0368*1+0+0.0135*1=7.908
e7.908=\$2,718.41

Log-Log Model (refer to “Log-Log” Excel Sheet)
7.6636+0.3300*ln⁡(0.90)+0+0+0+0.1838*1+0+0.0421*1+0.0407*1+0+0.0133*1=7.909
e7.909=\$2,721.14

From the linear, semi-log, and log-log models revolving our variables chosen, it is clear to see that the price of the diamond based on the professor’s diamond specifications is estimated at \$2,747.91 (linear model), \$2,718.41 (semi-log model), or \$2,721.14 (log-log model). However, as the professor chose a sample of diamond wholesalers, we cannot use these figures as the final estimation point, a 95% confidence interval for the price the professor could’ve paid (for a diamond of the same specification) is needed in order to truly determine whether the professor paid a fair price or not.

Determining 95% Confidence Interval of Possible Prices the Professor Could’ve Paid

T-cutoff:=TINVα,n-1=±TINV0.05,229=±1.970377

sn=standard error from regression
sn=standard error from regression
Confidence Interval:
x-tn-1, αsn< μ< x+tn-1, αsn

Regression | Sample | Standard | T-Cutoff | Lower | Upper | Exponent | Exponent |
| Mean | Error | (α=0.05)  | Boundary | Boundary | Lower | Upper |
|   |   |   | (LN for logged)  | (LN for logged)  | Boundary | Boundary |
Linear | 2747.9070 | 279.9645 | 1.970377 | \$2,196.27 | \$3,299.54 |   |   |
Semi-Log | 7.9078 | 0.1079 | 1.970377 | 7.695104 | 8.120502 | \$2,197.56 | \$3,362.71 |
Log-Log | 7.9088 | 0.1081 | 1.970377 | 7.695887 | 8.121725 | \$2,199.28 | \$3,366.82 |

The confidence intervals from the three regressions are highlighted above. The price that the professor paid, \$3,100 falls within each of the three confidence intervals, indicating that we can be 95% confident that the professor paid a fair price for his girlfriend’s diamond. However, \$3,100 falls within the upper reaches of the confidence interval, which suggests that he could have got a similar quality diamond for a cheaper price.

Other Papers Like Diamonds - Should You Buy?

Blue Nile Essay

1194 words - 5 pages ￼ Eric Salkewicz Bus 4001 Company Profile The company was founded in 1999 by Marc C. Vandon after purchasing an existing diamond dealer website that later became Blue Nile. By 2009 Blue Nile has become one of the largest online retailers of diamonds. Selling diamonds is not all that Blue Nile offers, amongst their diamond jewelry there are plenty of other gold, platinum, silver and pearl pieces for purchase. In addition to

Blue Nile Essay

1594 words - 7 pages for Blue Nile are their competitively low prices and their high-quality diamonds. Providing shoppers with information and guidance throughout the purchasing process is another one of their strengths. Weakness- It is hard to get new clientele especially to purchase jewelry that you cannot try on online. In my opinion this is their greatest weakness. You are less likely to get a baby boomer or a traditionalist to go online and buy jewelry based

Ec142 Week 6 Homework

1113 words - 5 pages profits. If that didn’t work they would use their vast stock pile of diamonds to flood the market and drive prices into the ground making it unprofitable to sell them. Third, when a country like Russia found diamonds and started to export them, De Beers would buy all the diamonds produced so they were the only conduit for diamonds on the market. They would just stock pile diamonds making the world go through them and they set the price. This

Social Performance of Organizations

2164 words - 9 pages buying up small mining operations. In 2011 the De Beers Group sold their remaining stake to Anglo American for \$5.1 billion in cash. (DeMarco, 2011). Before the sale the diamond company was owned by the Oppenheimer family. Now Anglo American own 85 percent of De Beers making them the primary stockholder while the Republic of Botswana owns the remaining 15 percent of the company. Mining diamonds involves a lot of factors that can effect a

Branding of Jewellery

661 words - 3 pages established in Mumbai. Nevertheless, the traders have to visit Antwerp, Israel, Hong Kong and other locations to buy and sell rough and polished diamonds. • Establishment of more diamond bourses will give a major fillip to India to emerge as an international diamond trading hub, and also to make trading in diamonds easier for the players in India. It will be easier to get the rough diamonds through these trading centres and also for getting buyers

For The Love Of God

503 words - 3 pages , not only in the form of the actual skull which provides its mold, but more importantly in the expenditure of life power in the often deadly process of mine working and in death resulting from armed conflict financed by the diamond trade. It's the most expensive piece of art ever created, costing between 16 and 20 million dollars to make, and almost 100 million dollars to buy. Why feed starving children in Africa when you can glue diamonds to a skull? This could only have happened under conditions of the most extreme inequality. Historically, artists have often made valuable trinkets and objects to demonstrate the wealth of the highest echelons of society.

Tesol unit3 module3 tasks

1077 words - 5 pages ) I'm not going to Paris. ......falling.................................... B) No? ..falling........................................ A) Do you travel to France by boat or by plane? ............rising....................... B) Oh! We always fly. ............falling....................... TASK 2 Imagine there is logical stress on a particular word in each of the sentences below. You should give an explanation of why

Based on the Marginal Utility Theory to Analyze Students’ Demand for

2159 words - 9 pages substitution in consumption and marginal rates of transformation in production, which are equal in economic equilibrium. 2. The analysis of marginal utility theory 2.1 The definition of marginal utility theory When consumers make a consumption choice, they always refer to their preferences. To describe such kind of preferences, economists put forward the concept of utility. If you want to know what marginal utility is, first you should know what

Blue Nile History

779 words - 4 pages Blue Nile Inc. is an online specialty retailer of fine jewelry. Blue Nile was founded in 1999 and today is the largest online retailer of diamonds. Blue Nile is based in Seattle, Washington and competes with traditional jewelry stores such as Tiffany & Co., and online retailer stores such as James Allen. The key feature of being able to search through thousands of diamonds by carat weight, cut, clarity, color and other characteristics, is what

Woolworths Case Study

587 words - 3 pages 1. By dropping the prices and increasing the product range, is Woolworths diluting its vales proposition? Value proposition is a promise to be delivered by the company to the customer, a statement that summarises why a customer should buy their products. The CEO of Woolworths has stated clearly that their products will add more value on the basis of “quality, innovation, freshness and unique placements”. This value proposition is in line with

Eco Test 3

1717 words - 7 pages : |    diamonds have a low consumer surplus while water has a high consumer surplus. | | | | | * Question 27 0 out of 1 points | | | Honda will sell its vehicles to anyone who wants to and can buy one. Honda is using a ________ allocation method.Answer | | | | | Selected Answer: |    first-come, first-served | Correct Answer: |    market price | | | | | * Question 28 0 out of 3 points | | | In the figure

Related Essays

Macromolecules Essay

2374 words - 10 pages dispersion properties. country. (n.d.). List of countries by GDP (PPP) per capita - Wikipedia, the free encyclopedia. Wikipedia, the free encyclopedia. Retrieved January 30, 2012, from http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita design. (n.d.). Should I Buy A Synthetic Diamond - Synthetic vs. Real Diamonds. Engagement Rings - Worlds Most Beautiful Engagement Rings | RingEnvy.com. Retrieved January 21, 2012, from http://www.ringenvy.com/engagement-rings/should-i-buy-a-synthetic-diamond-synthetic-vs.-real-diamonds

Blood Diamonds Essay

1418 words - 6 pages generated from African diamond exports. Warlords use the money from selling these high priced and high sot after goods to buy guns and other weapons to inflict pain and suffering on human beings. The Western World has mostly turned a blind eye to this issue because the high demand for diamonds around the developed world. As the Issue became more and more main stream, Nations like Canada and the US tried to take action with issue and have made some

Debeers Case Study

984 words - 4 pages other retailers in the market and may increase pressure on suppliers. 4. Should De Beers pull the plug on the CSO’s stockpiling strategy? Depending on your answer, what specific actions would you recommend? The strategy of De Beers was to control the market and punish the players that do not adhere to their cartel by buying and stockpiling most of the diamonds on the market through the CSO. * With increasing liquidity problems and

Blood Diamond Movie Review

2225 words - 9 pages on the resources and they even harmed the people living in there. Another economic concept that underlies in this movie is that, there is an opportunity cost. The opportunity cost is what you give up to get that item, and the movie indicates that they are exchanging the lives of the innocent people in Africa for diamonds to be traded as firearms and weapons. In this film, trade is not mutually beneficial, maybe on the side of