How can a diamond be "used" anyway? The way I think of it, you have wholesale and retail markets, which I completely understand (profit through information asymmetry) but is there really something stopping the same diamond from being sold wholesale and retail dozens of times as long as it's not damaged?

> is there really something stopping the same diamond from being sold wholesale and retail dozens of times as long as it's not damaged?

Yes. Tradition. You just don't sell diamonds, period. It's completely arbitrary - that's why it took DeBeers decades to firmly establish it within society in the past century. See the 1982 article every other poster links to.

If buyers had a choice of the same stone at a much lower price, they would take it. It sounds like a massive arbitrage opportunity.

Where can one buy used diamonds? I don't imagine they suffer much wear, and they're millions of years old already.

I assume you'd get them in a pawn shop, still set in whatever they were set in when they were pawned.

That's retail diamond though.

There is a price list index for wholesale stones

http://www.idexonline.com/Diamond_Index_Drivers.asp

But not over a decade or so. My old iPhone4 is probably worth (percentage wise) the same as a diamond purchased at the same time. But an iPhone2? My iPhone4 in the year 2020?