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WoW Millionaire: Undercutting

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Oct
15

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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 lessons and other things about WoW economy. You can usually find a new post every week of the WoW Millionaire guide. WoW Millionaire is provided free by wow-pro.com.


While Shika seems to be a bit busy with RL, (and lazy :P) his gold posts has become abit rare, I’ll be sharing my experience while waiting. So for this first time post, you’re gonna learn about undercutting, and what it is used for.
Undercutting is the most basic thing I could think of if you wanna be a succesful auctioneer, that’s the reason why I choosed that.

So, for those who don’t know what undercutting is:
Undercutting happens when players beat each other prices on an auction at 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. Why is not always good to always win on the market? 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 your stuff very 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, minus profit actually.

 

    What you do (you can do 2 things):
    • Buy
      That’s here a monopolist steps in. Buy low sell High 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 realizes 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.

Conclussion:
Undercutting is a good method for the beginner auctioneer. Being a undercutter is easy and simple, and you almost win every time. But if you wanna control the market, this might not be the best way to go, it is possible but you more likely wanna Monopolize it. Taking control of an already controlled market with Undercutting, is very optimal, but if you wanna keep the market yours, it’s not the best way to go in my opinion.

So hold on for the next post, I’m gonna talk about Supply and Demand!


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 free by wow-pro.com.

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    Oct 16, 2009 @ 16:15

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

    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.

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    Oct 17, 2009 @ 1:31

    It’s a nice guide. As anIt’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.

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    Anonyme Répondre
    Oct 20, 2009 @ 18:01

    Actually when you undercutActually when you undercut you don’t reduce the demand, that’s the oppost.
    When you lower the price the demanded quantity will rise, people will have to pay less for something they want, which means that with the same income they will be able to buy more.
    What MAY happen is, since price is falling down suppliers won’t be interested in selling cause profits will be 0 or negative.
    You can still be making more profit by selling at a lower price then selling at a higher price, it just depends on elasticity. When the demand for a good is elastic that means if you lower the price of the good there will be a big increased in the demanded quantity, if it’s not elastic then a lowering the price will only increase demanded quantity for a bit.

    Example 1: Player X is a monopolist, that means is a price-maker, since he owns the market for that good he picks the price he wants to sell the good. What will happen? People see there’s an industry making profit. What do they do? They enter the industry.
    What will happen? People will be entering the industry of iron until the point where profit is 0. There will be so many ppl selling iron that there is no longer a monopoly and there’s perfect competition.

    Example 2: I think it’s ok.

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    Oct 23, 2009 @ 22:16

    You got me there mate -.-You got me there mate -.-

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      Oct 23, 2009 @ 23:22

      Lazy genius!Lazy genius! 😀

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        Oct 24, 2009 @ 10:09

        Mhm, I should write a guideMhm, 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.

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