Logic of Undercutting?

[Yeargdribble]

If people don't care about the gil then why don't they just npc it? If you want to move product fast, I can't think of a faster way than an instant sell tnpc.

From most of my mules it takes about as long to run to the AH as it does to run to the NPC. I can list things for 101 gil and get full price. I don't usually sell singles of things but I'm sure if I listed a single silk thread for 101 gil I'd got 1-3k for it. That's still 900 more than what the NPC would pay me for it. Maybe I didn't make and extra 1-2k but for the gamble of putting it up at only 101 I did get more than I would've at an NPC for the same amount of effort.

It's the same with many other items that I might list for 1001 gil or 5001 gil. I don't look them up... I just guess. Sometimes items sell for 50k over what I listed them for because I was unaware of their market (though I do pay attention). Just by guesstimating the worth I can turn a very small amount of items that may be worth 4k at an NPC into 100k+ at the AH and only list them for around 25k total.

If I get screwed and someone does pay 101 gil... meh. I didn't lose that much. That kinda thing happens at best 1/10 times but more like 1/100. This keeps a perfect balance between:

a) moving things through the AH fast
b) spending very little time looking up the going rate
c) making a good profit for very little trouble

[Omniblast]

one reason for undercut, is the product priced for lowest, ive heard, is sold first.
example

bee spatha:

bee spatha1 - 2k
bee spatha 2 - 1.9k

#2 would sell first

thats what ive heard and noticed in my ah when i sell ore for different prices

maybe its not true, if not, then.. idk why people undercut

This is how it works:

If someone bids 1.9, #2 sells first. If someone bids 2k, however, #1 sells first.

I've always thought that the lowest would go first. I don't see why #1 would sell first as opposed to #2 selling if someone bought it for 2k. What if they paid 2.1k for it? Which one would sell first? Still #2 would sell first because it was lower.

The question should be if both were priced at 2k, which one would sell first? What if 3 or more were priced at 2k, which one would sell first? Does the first person who put it up (timestamped at 9:00am) as opposed to the person who put it up at 9:01am sell first?

[Raydeus]

Actually yes I did, put in the sea comment I was selling OJ and Meatballs = <fish> <bait>. Although I think its more my location than the sea comment getting my OJ to sell.

Oh I see.

This is how it works:

If someone bids 1.9, #2 sells first. If someone bids 2k, however, #1 sells first.

Nope, the item with the lowest price will always sell first regardless of the amount someone bids.

If there are 4 items for sale

#1 1000
#2 980
#3 930
#4 1500

They will always sell in 3, 2, 1, 4 order.

[Bishop]

(Now, don't get me wrong. It's not so much the prices themselves, but nowhere am I seeing any USEFUL undercuts, on like say-the multimillion items {ie. Scorpy Harness, Woodsman rings, etc.} to make it worthwhile.)

Lol, you are so wrong. Maybe if you would check the prices of those items more often, you would see. In rag, SH prices dropped below 5m. It's at 4.5m right now I believe. SH+1 is now almost 8m. PCC has dropped like a rock too ever since the change with argus. It's dropped to 15m and still too many sellers with too little buyers. Leaping boots dropped from 2.2m to 1.5m. Hows that for useful undercutting?

[Yeargdribble]

If there are 4 items for sale

#1 1000
#2 980
#3 930
#4 1500

They will always sell in 3, 2, 1, 4 order.

QFT. This is why if I list something worth 10k for 101 gil it will almost always sell first. Also understanding most people's bidding habits means that it will most likely sell for 10k anyway. So I got a few benefits out of my undercutting pricing.

1) It sold fast
2) It sold for a decent amount of money
3) I didn't have to look up it's worth




Some advice if you think that listing a 10k item for 101 gil is risky. If it seems like it's a lot of money to you keep in mind that isn't not much to me and a lot of other people. You should try buying things at horribly undercut prices if it's worth the time to you because there will be other people undercutting similar to the way I do. It happens all the time.

[Omni]

Is there a logic behind undercutting by 33% of the going price of silk thread?

Undercutters that do it by that much bother me. In a day, Silks on my server have gone from 3k to 2k to 3k to 1k, singles.

Why do people elminate potential profit?

there is no logic. its not 1 individual plaguing the market by selling his stack for 1k. its just how markets work.

like mikejustice, omniblast, bishop and others have said, its just supply and demand at work. it works like that in rl, it works like that in game.

people want to sell product. the ah allows 7 slots. the longer your item takes to sell, you lose the potential to move other items. ie: what omniblast was talking about: turnover.

if a restaurant is full all night but only has 10 unique customers, it will make less than a restaurant that is half full all night but has 25 unique, fast eating customers.

trying to push profit up in supply heavy markets isnt going to happen easily. either, you have to be the supplier or you're going to need to lower prices bc someone else will.

with big ticket items rare items, theres always more sellers than buyers. not everyone out there is able to afford or want to afford a pcc. so when you have that bcnm40 going off 200 times each weekend, the 3-4 pcc that go up are usually going to go back to their sellers, so to avoid that they keep lowering it to try and get buyers who bid lower, else they gotta eat the tax for putting it up.

for high demand and even higher supply items, the rate at which these go are so fast that if you set yourself too high, natural market forces will always lower the price. then you end up with some fire crystals at 6000k and end up selling at 4000k at the end of the week. then you wasted those 4 slots in your ah and the tax on them.

its not easy but the 'logic' is there. you just gotta work with the market not try to fight it (unless you ARE the market).

[Legal Fish]

Why should Weavers get it easy? Silk should be 10k. It's not like Weaving is expensive or anything? So let's raise the price of one of their most vital materials, because they have it so easy.

PS. Lower the price of an product, the faster is sells. This is why people undercut. It is only harmful when crafters undercut, which has happened so many times, they can only make money out of farming their own materials or HQing. People undercutting materials is not harmful, as it means cheaper prices on crafted items(armor, food, ect).

[qaitakalnin]

The thing is Legal fish, at least on my server, when the price of the basic goods goes up the price of the finished goods goes up, when the price of basic goods goes down the price of the finished goods stays at the same price. Mostly cause now crafters are 1 makin more than they did before and 2 know that people will pay those prices.

[PTT]

Omni Ragnarok speaks much truthitude.

/begin
When the supply of an item runs out, people are willing to pay more to obtain it.
When people are willing to pay more to obtain it, prices rise.
When prices rise, people saturate the market, hoping to earn money.
When the supply of an item increases, people want to sell theirs quickly (Over others).
When people want to sell theirs quickly, they drop the price to move theirs first.
When people drop the price, the price of the item steadily drops.
When the price of the item drops, supplying the item becomes less profitable.
When supplying the item is less profitable, less people supply the item.
When less people supply the item, supplies of the item dwindle and run out.
/repeat

[Visper]

one reason for undercut, is the product priced for lowest, ive heard, is sold first.
example

bee spatha:

bee spatha1 - 2k
bee spatha 2 - 1.9k

#2 would sell first

thats what ive heard and noticed in my ah when i sell ore for different prices

maybe its not true, if not, then.. idk why people undercut

This is how it works:

If someone bids 1.9, #2 sells first. If someone bids 2k, however, #1 sells first.

Um...I don't think thats correct!! The lowest listed item always sells first. Items that are listed for the same amount of money are sold based on who put the item on AH first.

[kuu]

Prism Powders are starting to be undercut on my server now, which has become my main source of income.

Its very very annoying. 30k last night, now its 25k and going down. I'll be losing about 30k profit total, not very nice.

The world isn't nice, business isn't nice, and basic economics is made on the bases that no one is nice.

It's sad but true, for every winner, their is a loser, so the only relevant theory about market forces i.e. supply and demand, is that they balance each other out, so that no one wins and no one looses( equalibriant) and both are satisfied.

The mentality that we must undercut to move product has produced crafting scenerios where we must HQ in order to break even. Scenerio's where our large tier 11 and 31 craftables like HQ staves, SH, and Haubs, etc, are slowly becoming unprofitable to make, even in their HQ version. Specific items of interest being Triumph earrings, Hauberk +1, just to name a few, do not produce a profit. Hauberks +1 on Odin specifically sell for an overall 1 million gil loss, to cover the HQ averages.

Ever heard of economics of scale? It's pretty similar to HQing. You take a lost to make profit. Because many can NQ and few can HQ and even fewer to HQ many.

Business is not fair, it's never fair, and the only way to defeat your "rivals" is to be as good as crafty....or cheat.

Is there a economist in the house? I remember reading a college thesis and article on the economics of a virtual economy, and I don't remember where I read it at. Does anyone have a link?

There are lots of theories/thesis on virual market places. After all it's no different then any "model" you punch into a computer. Most are ebay, ish models, though, as you said different from FFxi AH model.

Simple rules tend to follow in virtual world more easily then real world though, due to the fact that most virtual world's are much more simple.

I've said it many times and I'll say it again. Virtual world economics(ffxi) is often even easier to analyze then real world due to having less variables and more true economic "ideals".
Differences between rl and vr ffxi off the top of my head
No banks
More univerial/transparent knowledge (everyone knows the price is true, at any time they look)
No favoritism/cheating (excluding hackers you can't bribe the AH) all players are "equal"
No/low transportation cost
Instant transaction
No depreciation/ Identical items (SHa = SHb = SHc)

No transportation cost/time, transparency and no depreciation are very big issues when you get into economic theory. And it makes a world of difference in terms of undercutting too.

example:
In the real world buying a used ipod on ebay 50% off isn't the same as buying a new ipod. One has to do their research on seller, S&H, time to reach destination, damage, battery usage, scratches, warrenty, etc, etc etc.

While in FFxi a knife is a knife is a knife = cheapest = sell.

[Aeni]

QFT. This is why if I list something worth 10k for 101 gil it will almost always sell first. Also understanding most people's bidding habits means that it will most likely sell for 10k anyway. So I got a few benefits out of my undercutting pricing.

1) It sold fast
2) It sold for a decent amount of money
3) I didn't have to look up it's worth




Some advice if you think that listing a 10k item for 101 gil is risky. If it seems like it's a lot of money to you keep in mind that isn't not much to me and a lot of other people. You should try buying things at horribly undercut prices if it's worth the time to you because there will be other people undercutting similar to the way I do. It happens all the time.

Unfortunately for people like you, I think exactly the same way in buying. I bid on the lowest and work my way up. Since I desynth for materials, having a low overhead just expands my ceiling for potential profit. Time is of no concern to me since I'm usually just accumulating materials for my binge desynthing and then storing the results until I notice that the supply on the AH hits rock bottom and the prices start to surge upwards. This is usually truest the moments before prime HQ synthing. Thus I reap my profits by gouging everyone in the eye.

[mikesjustice]

Ever heard of economics of scale? It's pretty similar to HQing. You take a lost to make profit. Because many can NQ and few can HQ and even fewer to HQ many.

Business is not fair, it's never fair, and the only way to defeat your "rivals" is to be as good as crafty....or cheat.

Certain markets are not really like this in our virtual economy. Like I mentioned before, there are items created, that literally will never profit even if you HQ the piece. Any fool can see a Hauberk, again as example, will produce 20 million profit from a 4 million damascus, but fail to account for the HQ average, and then figure in the NQ losses and Fail results into the equation. This makes the overall scenerio a losing position, but unfortunately many are blind to look at it this way.

There really isn't a bottoming out for certain pieces. I've been in the game a long time, made many pieces which most likely 95% of the FFXI members will never experience first hand across so many guilds. Times are very different now vs back then.

Seriously to apply economics of scale to higher level tier 11 and tier 31 pieces is just silly. A crafter is limited by the materials available, and usually a slower demand for end products. There isn't an endless supply for a crafter nor an overwhelming demand from consumers. With higher tier items you simply can not apply Walmart tactics, it doesn't work that way, especially when your banking on HQ to profit. You can't simply up production.

[Legal Fish]

Assume makes an ASS out of U and ME. -Lux (Hades)

This phrase was not created on FFXI.

[Yeargdribble]

Unfortunately for people like you, I think exactly the same way in buying. I bid on the lowest and work my way up. Since I desynth for materials, having a low overhead just expands my ceiling for potential profit. Time is of no concern to me since I'm usually just accumulating materials for my binge desynthing and then storing the results until I notice that the supply on the AH hits rock bottom and the prices start to surge upwards. This is usually truest the moments before prime HQ synthing. Thus I reap my profits by gouging everyone in the eye.

When I'm buying synthesis/desynth materials I think this way too. I stock up but will not spend beyond a self-imposed cap. I only do this when buying things in ultra bulk.

Sadly overall and not so sadly for me personally, most people do not think like you and will generally pay full price no matter what. I make enough profit off of those people to not worry about people like you that are smarter about the market.


As for what you mention about gouging... Me and my wife will often do the same. Like you say there are certain times when certain things bottom out on the AH. This are great times to sell. We actually will make a rock bottom on our own. Certain items are hot at certain times so we know when those are and have stored up massive amounts of these. Then we can just buy all of the remainder of any consumable off of the AH and then turn around and sell them for more than we bought them for and generally have the only mass quantities of said item on AH.

Eventually other crafters will catch on but usually not before we've already made a killing at the gouged price. If we get undercut so bad that stuff gets sent back we just wait til the next time that conditions are right and do it again.