Tobold's Blog
Monday, December 08, 2008
Trade war

It's WoW PvP on Tobold's blog today, but in this post I'm going to talk about a very different kind of PvP. Because while my priest is doing Wintergrasp, one of my bank alts is involved in a trade war with another player, or possibly his bank alt.

The story started shortly after WotLK came out, and I was leveling up the alchemy skill of my warrior, and the jewelcrafting skill of my priest. It turned out that to get alchemy up, you could make uncut meta gems, out of green gems and eternal elements. And to get jewelcrafting up, you could cut those uncut meta gems. And of course my priest, who is also miner, was gathering the green gems and eternals needed when mining in Northrend. Great synergy, priest mines ores and prospects them, warrior turns them into meta gems, priest cuts the meta gems, both level their tradeskills up. As a bonus, the warrior has transmutation mastery, and once I even got 5 meta gems instead of one out of a single transmutation.

While I was primarily interested in the skill gains, it turned out that the cut meta gems are quite valuable. You don't sell a whole lot of them, but they do sell for up to 200 gold on my server. After finding out how good a business that was, I used my Dalaran jewelcrafting tokens to buy more meta gem recipes, and produced more meta gems, just for the money. Send them all to the bank alt, who I log on once or twice a day to look after my budding jewelry business.

What quickly became apparent was that there was one other player in the same business. I would put up my gems for 200 gold, and next time I check he had put up his gems for 199 gold and 99 silver. So I put up the next batch for 199 gold 95 silver, and so on. A genuine trade war, and always with the same guy. With time more people get hold of the rarer recipes, and profits collapse, but while the expansion is still young, the profits are great. I must have made over 4000 gold just with meta gems, after expenses and buying some eternals I didn't have enough of. There will be more demands for meta gems when more people reach the level cap, but I'm afraid supply is rising faster than demand, and ultimately meta gems won't sell for much more than the cost of materials. If not less, because some people don't mind to operate at a loss as long as they gain skill points.

The kind of trade war where you continuously try to underbid the other crafters is due to the relatively primitive auction house system of World of Warcraft. There is no blind auction house system, like in Final Fantasy XI or Pirates of the Burning Sea, where you only see a historic of previous prices, but not the exact sales price of the people offering goods. And there aren't any buy orders, like in EVE Online. So unless the fees for putting up a ware on the WoW AH are great compared to the sales price, it is often a good idea to cancel your auction and underbid the underbidders, driving the prices to the bottom. The same happens in other systems, but usually slower. The WoW system, where every seller sees the prices of every good on auction and can thus underbid them, deteriorates profits the fastest. So I'm pretty sure that while I'm cursing about that other guy ruining my sales, he's having some choice words about me as well. That's why I'm using an unguilded bank alt for such activities in the first place. :)
wouldn't it be wise to chat up with him and make some agreements about prices?
Are you suggesting a price-fixing cartel, Thorsten? That would be against the law, wouldn't it? ;)
That would be against the law of the real world, there is no according law in WoW ;)

But are you sure those Metas sell for much more than the cost of materials? On my server raw materials were much, much more expensive from the start because everyone was maniacly trying to raise their professions, no matter the cost. Auction House is pretty much dead because nobody can afford the prices for raw materials and nobody wants any end products.
Of course, the Prisoner's Dilemma applies to cartels. The best strategy is to get everyone to agree to fix prices.. and then lower your prices.
I noticed something similar with Primals one weekend. I bought up the lowball priced ones and resold them at my price. Worked out well, hehe. Isn't that what they call supply-side economics?
against the law in RL? somehow building companies, supermarkets, CD/DVD stores and gasoil stations seem to have overlooked that little piece of the law where I come from ;)
I take the opposite approach. When I see someone undercutting my Infinite Dust on the AH, I buy out all his auctions, and resell them at my price. Everyone wins; his auctions get bought out, I eliminate a competitor, and I make a small profit as I do so. Or not so small - I'm about 5000g richer than I was last week.

Well, maybe the customer doesn't win. Tough luck, customers!
>>I take the opposite approach.

I'll do that, but only in markets where I know supply is fairly limited. I find this is a better strategy for the raw materials of an item. For example, I used to soak up supply on Thick Clefthoof and Cobra Scales in order to drive up the market on Nethercobra and Nethercleft leg kits.

I don't mind the competition as long as people act sensibly. What drives me crazy is when one of you is selling at 200g and the other comes along at 180g. Why?! 199g will sell just as fast, why drive the market down 10% for everyone? I blame Auctioneer.

One guy in particular back in BC was really driving the market down and I actually whispered him one day. Once he realized what he was doing he started undercutting by small amounts and everyone was happy again.
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I had skinnnig and mining as professions.

My personal strategy was to offer at the same price as the competition. Even if they ruin themselves in price wars, as a pure gatherer I make money nevertheless.

I am on a high population server: I always get my stuff sold, even if I sell for more than some other competitors. Because there is enough demand and somehow never enough supply. Many players on EU-Frostwolf are hardcore and go for leatherworking and enchanting or other non-gathering professions just to maximize their char rather than their money.

I saw people selling for a lot less than me, but I never had serious issues with that. It seems that you are on a fairly small server that this can happen, Tobold.
I actually leveled my paladin up to 68 just to get him to northrend to train up alchemy, so his transmutes can add to my JC. It cost me close to 1000G to skill up, but I've made most of it back since then.
Also, a lot of miners miss that they can transmute Titansteel. It takes 3 titanium bars and 3 eternals, but if you can mine the mats you can make a bit more profit. 20 hour cooldown though. It's just hard to get the Eternal Fire from mining.
I think I've spent most of my time in the expansion mining ore in the Basin, trying to get 5000G for my epic flying training. It's impossible to compete for ore against guys with Epic flyers. They swoop down and grab it before you can get close. Annoying. But them's the breaks when you take a year off from playing WOW.
Most people don't notice that the starting bid is the tiebreak for auctions of the same buyout process. For best placement, I list my auctions at the same as the lowest price, but with a lower starting bid. This puts your item first without lowering the buyout price.

It also has a secondary effect of not appearing to undercut, which makes hardcore auction people less angry.
Er, that's "same buyout price" above, not process. Too much coding...
Sometimes (not always) if two or three people had the same item listed for 10/20, 15/19, & 18/18, I'd buy the first guy's item, the one listing at 10/20. The reason being he was probably the first guy to list, then the others came along and undercut him. I'd especially do this if I knew 20 was still a reasonable price, and that I wasn't being gouged.

Undercutting doesn't always get you the sale.
Tobold I think your mistake is lowering your price by 5 silver. This is pulling the price lower at a faster rate than needs be. Every time you check your bank alt you should undercut his prices by the absolute minimum sum, 1 copper if that is possible. I thought about this a lot when I was playing EVE and I became quite good at it. The reality is you are time-sharing the market with this other player. Every time you check your bank alt and lower your prices to 1 copper below his price you own the market until the next time he logs on. Providing you both log on regularly at fairly random intervals you should both own the market for similar amounts of time and should share the sales between you. Of course you won't sell as quickly as if you were the only seller but be realistic, accept that you are now sharing the market. It is in both your interests not to drop the price by any significant amount so the absolute minimum adjustment is what is required. Lowering the price by more than this is wasteful and is also a signal of weakness. It often indicates that a seller is hoping that you will go away and not undercut them again. An experienced seller can spot this straight away and will respond very quickly with a 1 copper drop just under your new price in an attempt to frighten you off.

You really should play EVE again Tobold. This sort of thing happens every day. I think you would love it.
Here is some advice to you gatherer types that end up with a bunch of stock of one thing. List like a quarter of it in small stacks (1 unit or so) at the current market price. This gives the impression that there is a lot out there at that price. Wait for people to undercut you, then list the another quarter the same way for the undercut price. Continue this process until you drop the market down a BUNCH then cancel your auctions and buy up everything below the normal sell price. I've knocked things down to half-price over the course of about twenty-four hours then brought the market back up to normal. In general, prices tend to be very consistent, but you CAN manipulate them to your advantage if you are bold enough about it.

The key is to be patient when selling it all back off again and do it over the course of a week or so instead of all in one day.
enter the trade agreement (aka price fixing).

my buddy has an agreement with the one other guy on the server that sells doodad Z (can't remember he item offhand). they both sell them for 200g flat, and refuse to undercut each other until a third or fourth party enter the scene. this way, it's pretty much random who's get bought, since they're both the same price, and they both get max value from the items.
hey tob, in your opinion , is it worth bringing EVE's trade mechanics into WOW or other MMORPG ?
On a slightly related note, I had a similar experience with the Granado Espada auction system. I was selling a premium item (bought from the real money item mall) and two other people had the same item. It became an undercutting battle and buyers were having a field day.

It ended up with me buying all their low-priced goods and selling at a much higher rate.
Buy orders should definitely be added. If they change only one thing about the auction house, I hope it would be the ability for buyers to make their requirements and the price they're willing to pay clear.
lol, you mention Trade War? Check out the TradeWars (yes, the original MMO from 25 years ago) game as the browser based remake...

It's... Awesome!
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