New threat from a substitute product in the diamond market

DeBeers Tries to Counter a Growing Threat: Man-Made Diamonds
by: Scott Patterson and Alex MacDonald
Nov 07, 2016
Click here to view the full article on WSJ.com

TOPICS: Innovation, Marketing

SUMMARY: A team of scientists working for De Beers is scrambling to stave off a looming threat that could tarnish the luster of natural-mined diamonds: high-quality man-made stones.

CLASSROOM APPLICATION: Students can evaluate the effect of an increase in the supply of man-made diamonds, which are imperfect substitutes for natural-mined diamonds, on the diamond market. An interesting psychological and marketing issue is the reason why despite identical physical characteristics, some people prefer natural-mined diamonds to man-made ones.

QUESTIONS: 
1. (Advanced) Lab-grown diamonds are "disrupting" the diamond industry. What is a disruptive innovation?

2. (Advanced) Why is the perception of relative scarcity important in creating consumer value of diamonds?

3. (Introductory) If man-made diamonds are physically identical to natural-mined diamonds, then why do some people prefer natural-mined diamonds?

Reviewed By: James Dearden, Lehigh University