The stones are judged by a standard that jewelers all over the world refer to as the four C's: carat (weight), color, clarity, and cut. Carat: The unit of weight used for diamonds. There are 100 points to a carat, so a 99-point diamond weights virtually 1 carat, and 45-point diamond weights a little less than half a carat. Color: Grading a cut stone for color means deciding the amount by which it derives from the whitest possible. Completely white (truly colorless) diamonds are rare, and therefore most valuable. Although most diamonds are a shade of white, diamonds come in all colors, including blue (Hope Diamond), apple yellow, canary yellow, pink, red, green, and even brown. Colored diamonds (called "fancies") are prized for their depth of color, just as white diamonds are valued for their lack of color. Clarity: Nature makes each stone unique. Some contain more imperfections (called "inclusions") than others. The fewer inclusions, the more valuable the diamond. A diamond's clarity is determined by taking into account the size, nature, and placement of these imperfections. (Keep in mind that slight flaws can not be detected by the naked eye and don't affect a stone's beauty. Cut: Diamonds are cut by skilled craftsmen according to a mathematical formula. A finished diamond has 58 facets, which are small, flat, polished planes cut into the stone so that the maximum amount of light is reflected. This reflection, called "brilliance", is important in evaluating a diamond's quality, since accuracy in cutting is essential to the diamond's beauty. More than have of all couples choose the round brilliant cut

The value of a diamond is ultimately determined by what the seller is willing to accept and what the buyer is willing to pay. The 4Cs help determine the relative desirability of a stone, but if supply increases and/or demand falls, value falls. If supply diminishes and/or demand rises, value rises. I believe diamonds generally have a pretty steep retail mark-up. Retailers charge whatever the market will bear.

Rapaport Price List

I believe I was told on one occasion it is based on the three C's Clarity Carat Cut. This is an old memory and may not be correct.

www.americangemsociety.com explains fully how the value of a specific diamond is determined.