How did De Beers' supply management influence diamond pricing for much of the 20th century?

• A. By flooding markets with cheap rough, driving prices down
• B. By eliminating marketing to let market forces set prices
• C. By restricting market access through exclusive distributors
• D. By stockpiling supply, controlling distribution to sightholders, and strategic marketing, stabilizing and elevating rough prices.

Answer: (D)

The main idea being tested is how deliberate control of supply and demand can stabilize and raise prices in a commodity market. De Beers orchestrated this through a threefold approach: stockpiling rough and releasing it in controlled, gradual amounts to smooth out ups and downs in supply; restricting market access by selling only to a small group of approved buyers (sightholders) under centralized management, which kept competition and price pressure in check; and using ambitious marketing that linked diamonds to romance and lasting value, creating steady consumer demand. Together, these moves kept rough prices high and more predictable for much of the 20th century by preventing oversupply and shaping demand. The other options describe less effective or incomplete strategies—flooding markets would push prices down, removing marketing would dampen demand, and limiting distributors without the accompanying demand strategy wouldn’t provide price stability.