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Revision of WoW Millionaire: Undercutting from Thu, 2009-10-15 22:04

eric's picture

Undercutting is the most basic thing I could think of if you wanna be a succesful auctioneer, therefore, It would be a very good starting subject.

So, for those who don't know what undercutting is: Undercutting happens when players beat each other prices on an auction (typical on the Auction House). If player X sells something for 10 gold, player Y which have the same thing will usually try to sell it cheaper (like 9g90s). The buyer will always buy the cheapest nevermind what. So by Undercutting player X's auction, player Y gets the gold, but 10 silver less than player X would get if player Y didn't undercut him.

but 10 silver less than player X would get if player Y didn't undercut him is the key word to why Undercutting is more tricky than it looks like. Isn't it good to always win on the market? No, not always, let me tell you why: There is several strategies for selling at the Auction House, the most common AND easist is undercutting. When you undercut, you reduce the demand of the item. So the dangerous part of undercutting (that you might already understand after reading the text in italic just beyond) is that the price may fall too low, because you keep undercutting the currently price.

Good things of undercutting:

  • The buyer chooses you.
  • You oftenly sell you your stuff incridibily fast
Bad things of undercutting:
  • The demand falls.
  • You drive the market down.

Undercutting is normally used of people who:

  • Want to sell some of their random things, who do not take part of the specific items industry.
  • Do not have any ulterior motive of what they are doing to the market.


I'll give you two examples on how undercutting can be used, and when it should NOT be used.

Example I (When it should be):

    You = You got mining as your main profession, and another random.

    Player X = Is our "enemy".

    Lately, the Iron Ore market has seemed to rise with about 250% of it's respective price. You notice that all of the Iron Ores are sold by player X. Player X is what we will call a "monopolist" in the economy world, so player X is buying up all the auctions, and resell them at a higher price. player X controls the market at the moment.
    What you will do: You put your Iron Ore's up at the price of 210% of the Iron Ores originally price (that's 40% below player X's). People will now buy your Auction instead of player X's, or player X will buy them and resell them at his own price (250%). By that, we undercut player X's auctions, but still make the double profit (but beware, you're undercutting, driving the price down, don't do that too much!)

Example II (When you shall not)

    Two weeks ago the price of Arcane Dust started to fall. Now it's on about 20% of what it was before. A lot of players keep posting and posting new auctions of Arcane Dust, and the price is going even more down (more and more undercut). Here it would clearly be a waste to sell anything, because the supply is higher than the demand = No profit, - profit actually).
    What you do (we can do 2 things):

    • Buy That's here a monopolist steps in. Buy High sell Low has always been good phrase, and that's exactly what we are going to do here. If you got the money, buy ALL the Arcane Dust and repost them at the price you want, remember that you need to make profit of it.
    • Pass Simple wait to the price of Arcane Dust will raise again, that usually happens when poeple relizes that they are only losing money. When you feel it's time, sell them.

The 2 examples is some very common ones, I've tried them both. The Arcane Dust back in the Burning Crusade were most of the disenchanters finally hitted level 70, and the iron one recently on my server.


WoW Millionaire is a World of Warcraft gold guide which is designed to people who feel that their knowledge about getting gold isn't good enough. In WoW Millionaire, I'll give tips, auction house strategies and other things about WoW economy. You can usually find a new post every week of the WoW Millionaire guide. WoW Millionaire is provided by Eric.

Comments

Shikamaru's picture

You got me there mate -.-

You got me there mate -.-

Jiyambi's picture

Lazy genius!

Lazy genius! Laughing out loud

Shikamaru's picture

Mhm, I should write a guide

Mhm, I should write a guide on how I make my money nowadays, but my laptop (WoWbook) broke down 2 days ago, so I'm pretty much in a corner here.

Jiruru's picture

It's a nice guide. As an

It's a nice guide. As an economics student I'd pick at your use of supply and demand in the last paragraph, but people will know what you mean anyway.

Jiyambi's picture

Very nice eric, love the

Very nice eric, love the lazy comment about Shika (he would totally agree Eye )

Looks good, I only skimmed it. Noticed that in the "Example II (When you shall not)" section you accidentally said "Buy high sell low" when you meant "buy low sell high".

Anyways nice post, looking forward to more! If you end up continuing the series, consider making a "cover page" to go in the Gold Guide category, and making all of these posts under the "cover page" category. I can help you with this if you need.