In contrast, when dealers value a polished stone differently, most of that difference will be due to their differing estimates of market demand and to their differential skill in detecting flaws in stones. In recent years, however, the skill factor has become less important. Although older dealers continue to maintain that even polished diamonds cannot be objectively graded and valued, in the late 1970s, the Gemological Institute of America began to issue diamond grading certificates whose widespread use made it possible for dealers with little gem expertise to enter the market, resulting in increased competition. By creating standardized ways of describing polished stones, grading certificates have facilitated the flow of price information.

XREF: The finding that standardization of information reduces expertise barriers and increases competition parallels classic information economics (Akerlof's lemons problem) and other markets where certification enabled entry, e.g., credit ratings or organic food labels.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 28