Bargaining powers of buyers and sellers on the online diamond market: a double perspective non-parametric analysis

This paper investigates the relative efficiency of buyers and sellers on the online diamond market using a non‐parametric double‐frontier setting. Our data consists in a sample of more than 100,000 round cut diamonds offered for sale online. For a given quality defined by a combination of color and clarity grades, we turn to the free disposal hull model to estimate the sets of efficient diamonds respectively for buyers and sellers in the price‐weight space. We find that the average bargaining power of buyers is lower than that of sellers. Regression estimates show that the relative efficiency of buyers is reduced for heavier diamonds and when there are many diamonds of the same quality offered for sale.