Tobold's Blog
Friday, July 17, 2015
Undercutting so that it hurts

In World of Warcraft trade chat as well as on various forums and blogs you will frequently find somebody complaining about people who undercut auction houses by a lot. You are being told that the only "correct" way to undercut is by 1 copper: That basically makes you sell the item at the same price as your competitor, but technically cheaper, and so in all likelihood your item gets sold first. If you undercut by more, so you are being told, you are playing it wrong. Of course that is just a jedi mind trick: The 1-copper undercut strategy favors a certain type of player, so that type of player wants to assure that you play by his rules. I'm here to tell you of the alternative: Undercutting by a lot.

Imagine a price war between two or more players wanting to sell the same item. Both undercut always by 1 copper. Who wins? It is pretty obvious that the "cost" of the 1-copper undercut is staying in front of the AH and reacting to the competition's every move. Perfect strategy for the unemployed basement dweller, but a guaranteed loss for anybody who either wants to spend his time outside of the game, or inside the game actually playing instead of camping the AH. The 1-copper undercut game can go on forever and the player with the longest breath wins.

So if you aren't willing to camp the AH all day, consider the alternative: Undercut by a significant amount of money, like 10%. If the competition undercuts by 1 copper, you undercut by another 10%, and so on. It is pretty clear that this *can't* go on forever. The heavy undercutting reduces the profit margin. So at one point one of several things will happen: The competition gives up, not willing to sell as cheap as you do; or the competition thinks you are too cheap and buys you out; or the competition undercuts your too cheap price by 1 copper and you buy them out. All of which scenarios are infinitely better than you never selling anything because you're always being undercut by 1 copper.

The 1-copper undercut is an artifact of WoW's badly designed auction house system. Other games show past sell prices and not exactly the prices the sellers are willing to accept, so you can't undercut by 1 copper. Undercutting by a significant amount is closer to real life economics: You win market share because for some reason you can actually sell cheaper than the competition, by being more efficient or by accepting a lower profit margin. There is no cheap trick that can beat that. Which is why significant undercutting is the way to go if you want to sell stuff in a competitive market.

Your suggestion is obviously good. However the 1c undercut isn't an artifact that doesn't exist outside of the game. It's a cartel offer, so everyone sell for the same price and decide sales via out-of-market methods (camping in games).
Aside from showing the price history, I think you need to allow buyers to list bids orders. The idiots can sit around all they want undercutting 50g with 49g99s99c, and then with 49g99s98c, etc. But none of that matters when the real traders meet the 48g buy order, and they are the one who gets their item sold.

This also fixes the problem of obtaining items that are rare or not commonly listed, as well as the problem of getting a rare drop that you aren't sure what it is worth or if it will sell (and for how much, since even auctioneer's pricing is total garbage for rarely listed items). Just take that load of stuff to the AH, sell what has offers and vendor the rest. People who don't really want to play the AH game can still get only slightly less profit from little more effort than just vendoring.
You don't always have to be the cheapest to move your product btw.

- Certain players pay a premium for full stacks of items instead of buying singles. When you sort so stacks show up first the most expensive are on top. Lazy players just buy the top and don't scroll down. Works with combat pots on raid days for example.

- Lower tier upgrade items for the profession epics are mostly bought in threes, if you see a couple at 6100 and then two undercutters at 5500 and 5400 or something I put mine at 6095.

There are likely a good number of players out there who do not even look at the market price for an item. They see what a vendor will give them and maybe double or triple that and count that as a win, oblivious to any undercut. I know somebody who does exactly that, and they cannot be bothered with me telling them how much more they could make. They are happy with their win.

And patience can be a virtue. I have noted that some items tend to go down in price on Friday and Saturday on my server. There is a big swell in listings as the weekend kicks off, followed by a surge in buying that seems to lag about 12-24 hours behind, so that by Sunday evening the market is often bare and people, desperate for that thing the need, are willing to pay quite a bit about the market price that existed just hours earlier.
Where have I heard this before? Oh, yeah...
Gevlon says:
"However the 1c undercut isn't an artifact that doesn't exist outside of the game."

Real world example: DirecTV and Dish Network. They are not competitors, rather they are cartel members. The offer the same thing at a high price and just 1c each other back and forth. Another example is car insurance in the US. EVERY insurer make the same claim... "People that switch save an average of 450 bucks!" That's because their industry wide pricing soaks everyone more the longer they have a policy.

I do not like the "undercutting game", so I don't play it. People don't "shop around", they don't know what the prices will be until actually going to the auction house. If a market is saturated to the point that they are ALWAYS in the AH, then the undercutters take over. In the "real world", outside of outliers like the Satellite TV market, products go through supply chains and brokers before they hit the shelves... this buffers supply and demand through a system of "futures."

DirecTV and Dish Network, however, work like the Auction House. You buy directly from them (Even with bundled packages, you are dealing directly with them.) So they know they have a cartel and play the undercutting game to make it look like competition.

In addition to the AH, I propose a new mechanic, a Broker NPC that will offer to buy your item directly instead of putting it in the AH. That NPC has perfect knowledge of the market, all sales, all listings, all prices, everything. The market server (A meta server all Broker NPCs in the realm are controlled by.) then stores that item and lists it in the AH until it sells. It slowly drops the price over time (Not in response to other players "undercutting" it), then adjusts the prices the Broker NPCs will offer based on actual sales. This basically bots AH camping, but it's doing it not for a profit, but to stabilize prices to where supply meets demand.

The Broker NPC, of course, will tell you the current prices and the sales info for any item you want to know about.

"There is no cheap trick that can beat that."

Sure there is. Grind stuff to sell 12 hours a day. The time costs you nothing, as you've already devalued it by deciding to use it to grind stuff to sell. If the time was valuable to you, you would have spent it working or something otherwise useful. Once a market reaches super-saturation, I.E. more are created than are actually sold, it's game over for that market.

The problem here is that there is a surplus of goods to sell. If you want to create a crafted item economy, then the crafting materials must be gated behind account wide gates. There is nothing stopping people from gaming that by having multiple accounts... except that each account has a cost associated with it, be that sub fees or token / PLEX purchases.
Generally when I auction items I price them to sell, often at a relatively low price. The auction game doesn't interest me, so I get them off my hands for more than a vendor would give, and I don't generally get them back and have to try again.

So basically the system WoW has for the WoW Token? (Not saying it's a bad suggestion)

"So basically the system WoW has for the WoW Token? (Not saying it's a bad suggestion)"

In as much as WoW's token exchange is a brokered sale, sort of. except I would pay the seller immediately, they do not and should not care if the item ever sells, that's the broker's problem. They have their money and they're happy.

You also need transparency (provide sales and pricing info on request.) and work in parallel with the player to player sale mechanic. Eventually, the brokers would replace most sales traffic if trust in them can be established. The player to player sale mechanic would then be left with the outlier transactions like super rare items.

"Which is why significant undercutting is the way to go if you want to sell stuff in a competitive market."

Indeed. The tears I've gotten over the years from some people has been rather amusing. My response is usually "Then buy my stuff and relist it if you think it's too cheap."
Yup. They say that the AH is just another type of PVP, and in my case I'm prepared to be a royal pain in the ass to those pricks who use a 2nd account or some kind of auction bot to repeatedly cancel/relist for 1c undercuts every ten minutes. I've SEEN those fuckers in action. Anything I can do to make their lives miserable is a win in my books.
I have always undercut by a substantial amount when selling anything on the WoW AH, and I'm sitting on a rather hefty cushion of gold as a result. Those who play the AH game may make gold faster then me, but my time is valued more on reaching achievements, farming mount drops, quest completion, crafting and gathering the mats needed for crafting.

I've also received messages and mails from players who think that my undercutting the AH is the "wrong" way to play the game, and as someone else mentioned above, I always tell them they should have bought my item(s) and relisted if this indeed was an issue for them. WoW is a time sink, so however someone values their in-game playtime is correct for them. The ones who play WoW wrong are those who vest themselves in an activity to the point of losing focus that WoW is many games to many people.
I use WoW Undercutter app to monitor my lots.
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