Lab-grown diamonds are draining the signalling power from the engagement ring

Couples today have more choices than ever when purchasing an engagement ring, largely because of the rapid rise of lab-grown diamonds. While mined diamonds have traditionally symbolized commitment and romance, lab-grown alternatives are reshaping how couples think about both the financial and symbolic value of engagement rings. According to The Knot's 2025 survey of more than 10,000 newly engaged and recently married couples, the average lab-grown diamond engagement ring cost about $4,300, compared with roughly $7,000 for a mined diamond. As these lower-priced alternatives become increasingly common, economists and consumer researchers are beginning to ask whether a less expensive engagement ring changes the signal of commitment that the purchase has historically conveyed

A signal only works when it is costly enough to hurt

The concept of signalling theory was first proposed in 1973 by Michael Spence, who stated that a party with superior knowledge of a product's quality could use a costly signal as a way to inform potential buyers about its value. Spence used the example of education to explain this concept; even if an education does not teach a worker how to do a job, it can still provide a way for employers to identify the best candidates for open positions. Likewise, the concept can be used to describe the ability of an engagement ring to signal commitment; if a prospective partner is not sure whether or not he/she is truly committed to the relationship, he/she would likely not be willing to make the purchase. Therefore, in the context of signalling theory, the purchase of an engagement ring is an example of signalling; the buyer's willingness to make a costly investment will help to distinguish between serious suitors and casual ones.

The emergence of lab-grown diamonds has made it possible for customers to purchase a signal for a fraction of the price of a mined diamond

Lab-grown diamonds and mined diamonds are both chemically and visually identical; hence, they are nearly identical substitutes. There are no visible differences between them to the naked eye, so the ring will look just as nice but will be much less expensive. This has caused price deflation: the wholesale price of 1-carat lab-grown diamonds has dropped roughly 90% since 2018, with another 26% drop in 2025 alone, according to industry price monitoring data. Retailers such as Cullen Jewellery in Australia are leading the trend to turn a luxury item into an everyday purchase. When a product becomes so inexpensive that it no longer has the financial "pain" factor to serve as a reliable indicator of commitment, its value as an indicator is diminished. As the financial "pain" factor diminishes, the ability of that product to send a credible signal also diminishes. Once the signal costs little to send, it does less to separate committed buyers from casual ones. This is similar to the market for lemons, where buyers who cannot tell a high-quality item from a cheap look-alike become unwilling to pay a premium for either.

The signal has not collapsed completely; it appears that many couples are reinvesting their savings into larger centre stones

The signal has not collapsed. Instead, it appears that couples are reinvesting their savings rather than putting the money aside. The average centre stone has now grown to 1.9 carats in 2025, up from 1.7 carats in 2024, and approximately 61% of US couples chose to buy a lab-grown centre stone, according to The Knot. This indicates that signals are adapting rather than dying. When nearly every buyer moves up to larger centre stones, the ring will still represent a form of conspicuous consumption (Veblen good), and the threshold for what constitutes a credible signal will move up again. A couple who previously expressed their commitment through a 1-carat mined diamond may now require a 2-carat lab-grown diamond to send the same message.

The greater concern is the pooling issue

The greater issue associated with signals is the pooling issue. Signals separate types of consumers when there is a significant difference in price, but once the price of a credible-looking ring becomes affordable to almost everyone, there is little, if any, difference between committed and casual buyers. This resembles adverse selection, where the informed party's type stays hidden — much as an insurer cannot easily tell low-risk customers from high-risk ones before they buy. A likely solution to the pooling issue of diamond rings is not the elimination of the diamond ring but rather a migration in the variables that constitute a costly signal (i.e., certified provenance, bespoke craftsmanship, or sheer carat weight) as couples search for the next variable that is actually difficult to fake.