Undercutting and You.

| Tuesday, October 6, 2009
Lately I've become more active in the economy. During this time I've noticed a few bad habits of people. I suggest avoiding these.

1) Undercutting way too damn much.

a) Saronite vendors for 1.25g per bar. The AH takes 5% of your sale. This means that if you want to break even you'd have to charge 1.32g or 28.32g per stack. I see a stack up for 27g. Others start at 29g. All it takes is one failed auction and the profit is entirely gone.

b) There is one gem at 150g. There are 10 at 175g. Don't try to undercut the 150g. It will sell. At the least someone will buy it just to repost it for 174g. So what do you do? Don't undercut the 150g, undercut the 175g, or maybe even join the 175g and help establish it as the new standard.

c) You really want to move your saronite ore and you don't want a failed auction, so you drop the price by 3g. Guess what, you just lost more than you would have by losing a deposit. Is it worth the time saved? That's up to you, but don't forget that the faster AH isn't free.

2) Undercutting when you don't need to.

a) There are two gems on the AH and they are popular like strength or intellect. Charge something at least comparable. Don't try to undercut when demand is clearly going to exceed the supply.

b) There is nothing on the AH and you're selling something good. Don't pull up your old auctioneer data and undercut by 5%. You're only undercutting no one at all, which is to say, your profits.

c) There is one other of the BoE epic on the AH. Don't undercut it. Just wait and let it sell. Then post yours and again have a monopoly. Or if it's unusually cheap and you like gold, buy it and repost for more. Then sell your next one later. It's like Carnegie used to say: "The only thing better than a monopoly is two monopolies; and enough money to buy half the country." Actually I made that up, but it's believable, right?

Undercut smarter, make more gold.

I won't pretend that I follow these perfectly. I'm not immune to whatever urge it is that makes us charge less than absurd amounts when we have the only BoE epic on the market. But I'm trying to reduce those inefficiencies which make me have less gold.

P.S. Do any of you care about posts like this? I know this isn't exactly where people come for anything useful, especially since I can't recall the last time I wrote about economics (past the last week I mean).

8 comments:

William said...

Economy is fun to read, but I am interested server variance.

On my high pop server Its very rare to see only a couple of one gem posted and most items are mass produced, the odds of you selling your item above the lowest cost becomes difficult as people will repost more items as they sell and probably are selling items cheaper than you can with dedicated farmers.

G-Rebel said...

Even though this is useful, don't beat yourself up over it, variety can be fun.

I'm active on a few servers and it's amazing how different each economy is. There was a time I was daily selling a Titansteel bar for 175g. Next thing I know about 10 people are selling in the 110-120g range. I waited a couple weeks for them to get this undercutting out of their system and started selling Titansteel at the 160-180g range.

Most undercutters are stupid and will forget how to sell something within a week and I can claim back the market at levels I'm more comfortable with.

Hana said...

I tend to disagree with 2c, except for the part where if it's cheap buy it out and repost it.

I don't wait and let someone else's BoE sell because that monopoly opening may never materialize. One of my guildies is always selling BoE emblem of valor bracers on the AH because he has nothing else to do with his badges and he's getting a better return than with the epic gems. If I waiting for him to finish... well... I'd be waiting a long time. :P

If there's a high priced item in the AH of limited need (things people don't buy all the time, like epic BoEs) I undercut by a decent chunk. Not enough that I'm not making a profit, but enough that the buyer will see the two prices and think they're getting a deal if they buy mine (even if they're not really).

Kiryn said...

It's sad but true that many people don't understand basic economic ideas like these. A lot of people just don't put that much thought into it. They have an item, they pick a price and toss it up there.

Klepsacovic said...

@William: I'm pretty sure my server is high pop, or at least high-medium. People just don't seem to be very active in the crafting economy.

@G-Rebel: Yep, there are times that I've had three options: buy it out and repost (risking my gold), undercut with them (lose my gold), or stand back and wait for them to get out of the way. I like option 3.

@Hana: You're right, there are the exceptions. I was refering to much more rare items (sword of jin in particular) which are likely to only have 0-2 floating around at a time.

@Kiryn: People tend to pick and choose those aspects of the game which they like. I'd be better off if I did some PvP. They'd be better off if they did some basic AH thinking.

gnomeaggedon said...

Of course you realize that the Greedy Goblin says undercut, undercut, undercut...

he's all about through put of course

He had an interesting reader post yesterday about a guy that transferred to a server and undercut the current market holder.

He did deal with this guy that he would only stay as long as he had stock...

214,000 gold later...

(Note: I don't actually use or even endorse GG's tactics... I'm still old school)

Klepsacovic said...

@gnomeaggedon: You're right. I should have noted that this is for a much different approach to the market and different markets. Tomorrow I'll have a post up explaining the two types of goblins. Spoiler: One type of goblin is awesome.

Stabs said...

I wrote a post explaining how and why I undercut in Eve Online.

http://stabbedup.blogspot.com/2009/10/eve-online-margin-trading-basics.html

I think things change a lot as you move from game to game but nevertheless Eve is a game where Gevlon's strategy probably wouldn't make someone particularly rich.

I think even in Warcraft it only works because people don't really understand the parameters. It's always better to search the market for commodities that aren't being fought over by goblins than it is to deep undercut.

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