http://www.cnn.com/2007/TECH/internet/02/14/heartbreak.diamonds/index.html

The attached article discusses a new auction site that connects people who want to buy or sell engagement rings. This is a relatively new market because the sellers all broke up before marriage and are looking to sell their ‘heartbreak diamonds’.

This auction site came into existence because the creator found that upon his break up the jeweler would buy back his diamond ring for only 32% of what he had paid for it. This is very similar to the situation discussed in class in which a seller has access to only one trader and buyer, expect in this case the trader and buyer are the same entitiy. As such, the trader can offer a low price which the seller is inclined to accept.

The creator of the auction site became unhappy with this situation and teamed up with a New York City jeweler to reach out to others that had similar experiences. By creating his auction site, he eliminated the monopoly situation that he and others like him faced. Now people who wanted to sell their ‘heartbreak’ diamonds would have easy access to at least two traders – the jewelers and the auction site. While the auction site does not strictly act as a trader by buying first from the seller and then peddling the ring to the buyer, it still acts like a trader by being an intermediary that offers the sellers an extra choice, thus ending the monopoly that the original jeweler had.

In fact, the auction site actually acts as a shared focus for all the prospective sellers and buyers. The success of the site is due to the many edges it has connecting to these sellers and buyers. These are relatively strong connections because the site has a system to verify the integrity of the traded rings through its own jeweler, enabling the trust of those who buy and sell through the site.