Do valued contracts on jewelry constitute a moral hazard?
Last fall Wal-Mart announced it would begin selling high-end jewelry. Wal-Mart is already the largest jewelry retailer in the country. Other “big-box” retailers such as Costco are also big jewelry sellers. Jewelry, even expensive jewelry, is now mass-marketed. Increasingly, such sales are accompanied by bogus appraisals; that is, appraisals of questionable value, often from a source of questionable reputation, and containing information of questionable accuracy, completeness, or verification. A few months ago Wal-Mart’s Price Club Web site advertised several expensive pieces of jewelry, accompanied by appraisals valuing them at far above purchase price. If the gems’ qualities were as stated in the appraisals (and surely the qualities were not deflated), the appraised values were almost double the jewelry’s worth. For example, one particular necklace selling for $300,000 came with an appraisal valuing it at $575,950. Costco’s Web site and its in-store jewelry cases showed pieces of jewe
