Guild Wars 2

I’ve seen a lot of threads lately that talk about undercutting in the BLTC. I’d like to propose some theories as to why people undercut other sellers and see if there is a method to determine a “proper” value at which to undercut. I’m sure some will say that undercutting in any way, shape, or form is wrong, but honestly, it’s going to happen, so we may as well embrace it.

Depending on the responses to this thread and whether or not it completely derails, I have ideas for other “game theory” threads regarding the BLTC such as, “Flipping”, “Overcutting”, and “Market Manipulation”.

Well…..on to the theory part of this thread.

Undercutting: Why do sellers do it?

First, we probably need to look at the types of players that are selling items on the BTLC. I believe there are three types of players (excluding bots) selling things on the BLTC: Average Players, Power Traders, and Market Manipulators.

Let’s look at the possible motivations for undercutting of each player type

The Average Player:
This is a pretty big demographic of the player base in GW2. It ranges from those that are completely devoid of knowledge in regards to the Trading Post to those that are working their way to becoming Power Traders.

The lower tier of these players just wants to sell their stuff to try and make a little bit of money. They don’t do any research. They have no idea what their item is worth. They go solely off what the item is selling for currently. I would guess that many of these players list their item for 1c less than the current sell price and move on.

The middle and upper tiers of players have knowledge regarding item pricing and want to maximize their profits. They do so by trying to buy low and sell high. They may or may not be calculating TP fees into their profit calculations. I would guess that many of these players also list for 1c less than the current sell price, but they’re doing so on specific items in an attempt to maximize profits.

The Power Trader:
These players are the ones with spreadsheets, calculators, data acquisition tools and other things that help them to evaluate each and every trade they make to determine how to squeeze every copper out of every transaction in the shortest time possible. Some are solely focused on one or two items and they grind it out all day long. Others are diversifying into multiple markets. You’ll see a lot of 1c undercutting going on here too, but the savvy seller is attempting to determine the correct price point to not only maximize their profit, but also receive the money for the item as quickly as possible so they can reinvest it.

The Market Manipulator:
These players are trying to do one of two things. They’re either trying to drive the price of a commodity down or trying to drive it up. Either way is risky and takes a great deal of patience, luck, and money. Their motivation to do so is that they either need that given commodity, so they’re driving the price down using their current stock so they can buy more at a lower price, or they’re trying to make more money from a high demand item by buying out lower priced items and selling everything off at a higher price. I’ve been seeing this practice a lot more recently for commodities used in creating Legendary Weapons.

Undercutting: Should YOU do it?

The answer to this question is really up to you. I believe there are many factors involved when someone is posting something on the BLTC for sale. I know when I post items for sale; I’m looking at the following things (in no particular order):

-Supply
-Demand
-Highest Buy Order Price
-Current number of Buy Orders at highest price
-Lowest Sell Listing Price
-Current number of Sell Listings at lowest price
-Number of Sell Listings at higher prices (occasionally)
-Vendor Value of the item I’m selling
-Spread between Buy and Sell price
-Am I currently selling any of the same items?
-How quickly do I want my money?
-What is my profit margin?
-How much money will I make from this sale?
-Who am I competing against? Average Player, Power Trader, or Market Manipulator?
-Hidden Supply
-Hidden Demand

Selling your item: How much should you list it for?

After writing much of this thread, I realized that this section really only applies to Power Traders. The pricing methods used by many of the Average Players and Market Manipulators have very different goals in mind.

The real question for me is: What is the “best” price to list an item for in order to receive my money quickly AND maximize my profits?

In order to answer this, I believe that the only way to know is to see a supply and demand curve, but even then, there is no “magic” price. The best we can do is estimate it. There are several prices at which we can list an item:

1.) 1c above the vendor value
2.) Somewhere between #1 and Highest Buy Order price
3.) At the Highest Buy Order price
4.) Somewhere between #3 and the Lowest Sell Listing
5.) At the Lowest Sell Listing
6.) Somewhere above #5

The first 4 price points are all undercutting; the only difference is how much you’re undercutting your competition. Since the topic of this discussion is undercutting, let’s eliminate price points #5 and #6. I think we can also eliminate #1, #2, & #3 because part of determining our “proper” price point is also to maximize profit in the least amount of time.

That leaves us with a price point somewhere between the Highest Buy Order and the Lowest Sell Listing. For many, this is obvious, but I wanted to state it anyway.

My theory on a “proper” price point

I know when I sell things, I want to make as much money as I can as quickly as possible. Before now, I haven’t put my thought into it. I usually just sold things at the current Sell Price and if I got undercut….so what? I was still going to make money eventually, even if I had to pull some of my listings and list them at a lower price. The problem I’ve had with this method of listing items is that I’m continually being undercut by other sellers and it could take up to a week or more to sell. This means that I’m actually losing money. My items aren’t selling, so I can’t reinvest that money to make more money.

I believe the real key to pricing an item is estimating the Hidden Demand for that item. We can see on the Trading Post the Actual Demand and the Actual Supply, but there’s a price point in between there where someone that doesn’t have a Buy Order in will buy your item. What we want to do is maximize the number of people that might want to buy our item….and this could be other sellers of the same item. So now it’s time to look at the price.

In order to pull in other sellers, especially on high value / high demand / low supply items, like Legendaries or precursors, we need to entice them to buy OUR item by pricing it so they can still make money on it, but we get our money now. This is where it gets complicated and because it’s complicated, I’d like to try and use a simple example.

Example:
The Lowest Sell Listing for the item you want to sell is currently 100g. The seller had to pay 5g to list that item and will pay an additional 10g when the item sells, yielding them 85g.

While you could list your item for 99g99s99c and put yourself first in line, you’d be missing out on one or more potential buyers…..including that seller. How can you price your item so that that seller and buyers in the “Hidden Demand” are more likely to buy your item?

Let’s look at some various percentages to see if we can find that “magic number”. Keep in mind that I’m trying to pull that other seller in to buy my item and the lower the price is, the more potential buyers there will be.

Original Seller’s Listing
Sell Listing: 100g
Listing Fee: 5g
Selling Fee: 10g
Final Return: 85g

Your Listing @ 1c less
You See
Sell Listing: 99g99s99c
Listing Fee: 5g
Selling Fee: 10g
Final Return: 84g99s99c

Original Seller Sees
Purchase Price: 99g99s99c
Listing Fee (100g): 5g Selling Fee (100g): 10g
Final Return: 85g – 99g99s99c = -14g99s99c

There’s NO WAY you’ll get the Original Seller to become your buyer. It’s more likely they will pull their listing and undercut you, or just wait it out. This isn’t a very good situation for you because if they do pull and relist, you’re going to end up losing your Listing Fee if you pull and relist…or you’ll be the one having to wait it out.

Your Listing @ 5% less
You See
Sell Listing: 95g
Listing Fee: 4.75g
Selling Fee: 9.5g
Final Return: 80.75g

Original Seller Sees
Purchase Price: 95g
Listing Fee (100g): 5g Selling Fee (100g): 10g
Final Return: 85g – 95g = -10g

It’s not likely that the Original Seller will become your buyer because they won’t want to throw away 10g

Your Listing @ 10% less
You See
Sell Listing: 90g
Listing Fee: 4.5g
Selling Fee: 9g
Final Return: 76.5g

Original Seller Sees
Purchase Price: 90g
Listing Fee (100g): 5g Selling Fee (100g): 10g
Final Return: 85g – 90g = -5g

This is getting better. Depending on how quickly these items sell, the Original Seller may be more inclined to buy your item because if they plan on pulling their listing to undercut you, they’re still going to be out 5g.

Let’s do one last example….

Your Listing @ 15% less
You See
Sell Listing: 85g
Listing Fee: 4.25g
Selling Fee: 8.5g
Final Return: 72.25g

Original Seller Sees
Purchase Price: 85g
Listing Fee (100g): 5g Selling Fee (100g): 10g
Final Return: 85g – 85g = 0g

In this situation, there is a much higher likelihood that the Original Seller will become your buyer. They can buy your item and relist it without much risk of losing money. They aren’t likely to pull their listing and undercut you either. They’d stand to lose too much money.

I think the better position would be to post your item in the 12.5% less range. That way you can maximize YOUR profits while enticing current sellers to buy your item AND pull in some potential buyers that feel like they’re getting a deal buying your item.

What do you think? Is there any merit in this kind of thinking?

Where do I fit in on the three types where I take the mid value of the prices and sell at a that?

LSp-HBp/2 – HBp
Where:

LSp is Lowest Seller price and
HBp is Highest Buyer price.

It sounds to me like you’re either an Average Player or a Power Trader. The difference between the two being the volume at which you trade. If you’re only doing a few trades trying to unload your item, I’d say you’re an Average Player. If you’re participating in 100’s or 1,000’s of trades a day, you’d be a Power Trader.

You do not fit into the Market Manipulator category….at least not in the definition I gave above.

I have been starting to sell a lot of darksteel (In RP wise, she is trying to make the new version of the magic ice box. money making wise, its as profitable as mithril or even better),

To open with, I’m personally against 1c undercutting. I’m also not in the business of trading on the BLTP for profit, but I have done it in other games and had some success.

However, there’s a pretty big problem with what you just asked. Firstly, you never considered the actual buy prices, only the sell prices. The thing is, by pricing your stuff so low, even if you end up selling much faster, you’re also losing on a top of potential profit. Of course, if you can cycle the funds you make at an increased rate, then it all works out. Ideally, you would experiment with whatever goods you’re trading in to see if you can price them lower for a higher return over the same time period. It’s also perfectly possible for you to go too low and sell stuff at a lower price with little to no increase in the volume you’re dealing with.

So in the end, there is no “magic number”. It depends fully on the market you’re dealing with and each of them has their own ideal pricing, which of course isn’t a constant.

The reason you see so much 1c undercutting is because it’s easy. It doesn’t take any knowledge of the merchandise you’re dealing with and you’re still better off than not doing it. In fact, considering what I just said, it’s rather likely that by 1c undercutting, you land yourself just below the “magic number” and end up getting nearly the ideal rate without doing any real work yourself. And even if you don’t, you’re still ahead of the guys who were in before you.

The question of whether to undercut or not is basically the prisoner’s dilemma. It’s very well know.

Simply put, undercutting is the Nash equilibrium.

Smooth Penguin.5294:

Simply put, undercutting is the Nash equilibrium.

^Yep. He’s right.

The reason I undercut by 1c when I’m selling my loot is quite simple: Undercutting by 1c is a pretty reliable way to quickly price the item. My experience is that the item will sell at that price, even if it takes a while. Even if my listing is on the tail end of some price fixing, the factors that made the first price fixer attempt that item will make another price fixer try later and then my item will sell. I’m in no hurry to get the gold.

I could get away with a higher price on some items, but, in order to find that price I’ll have to pull up the buy page and then look up the item on GW2spidy or GuildWarsTrade. Once I see all the data I can quickly estimate a good price. It just takes to much of my time to look up the information.

Eve Online puts all that information in one place, which is just a few clicks away. So I could get the information much quicker. I wrote up a comparison here. The big points is that Eve puts all the orders in the same place, and has a graph of the prices that trades took place at. Since the information was quicker to access, I did access it a lot more often.

When I’m flipping items on the trading post, then I’m dealing with fewer items in much higher volumes. So looking them up has a greater payoff for much less work.

I think it also help to remember we’re in a system that is still inflating to equilibrium – the money drained out of the system by repairs, travel, Icy Runestones, and TP fees still hasn’t caught up with the gold flowing in from adventuring and RMT. So on the whole ALL of your buyers have more coin over time and become more able to afford asking prices for the things they desire. You only need to undercut if speed is a factor in your future actions, if total numeric profit is you chief concern, you can actually price at or above the asking price of many actively traded goods and get your money tomorrow as easily as you can undercut a penny to get it in the next 10 minutes.

If you are logging out for the day anyway, keep the penny for yourself.

Charismatic Harm.9683:

[cut]
There are several prices at which we can list an item:

1.) 1c above the vendor value
[cut]

why anyone should do that and lose money because of the fees ?

what really matter is:
1. average (1 week) price of that item
2. how many items are listed at a certain price

if i see something for a week at about 90c and i face this situation:
12 @ 78c
3 @ 80c
65 @ 84c
1250 @ 86c
i’ll put my items at 85c

if i face something like this (for the same average 90c item):
xx @ 1s67c
xx @ 1s68c
xx ….

i know something wrong is going on and i’ll wait to list my items…

When selling random drops, I still typically undercut by 1 copper. It’s convenient, and I’m dealing in low enough volume it doesn’t really matter how long it takes to sell. Further, when I’m selling random drops, I’m typically trying to empty my bags as fast as possible, so I can get back to active play.

In my trading operations, I used to list 10% lower than the lowest sell. That did really well in getting my inventory to clear fast, so I could quickly reinvest it. But after a while, my volume of transactions reached a point where this was cost-prohibitive in terms of time. So now I undercut by 5%, in larger volumes, in the hopes that I get just a bit more cash in less of my time, rather than less time overall (so I can actually play the game). For the most part, it DOES eventually clear.

I think you are putting way too much emphasis on the original seller wanting to buy your item to flip later, when you should also be looking at the demand of an item.

I can’t speak as a power trade or a market manipulator, because I’m neither, but I have had significant wealth in the game and I never made an effort to keep constant track of items that I listed. Yes, I could profit off using your method of buying the undercutter but it is still a huge risk.

While I initially started the post talking about trading in general, I soon realized that there are far too many factors to consider and there is no one way of pricing items that applied across the board for all things traded on the BLTC.

The examples I gave at the end of my original post focused solely on a high value, high demand, low supply market….such as Legendary Weapons and their precursors.

There probably aren’t as many people with their money invested in those markets though. I’m sure that it is a few people / guilds that are attempting to control the prices of those markets. So, the examples I listed above are in the attempt to give those people controlling the market a reason to buy your item instead of either waiting for yours to sell, or pulling their listing and undercutting you.

In markets that are highly fluid, that have 10,000’s of trades a day, and have buy and sell prices that are close together….none of the above examples apply.

I think that most of the information I stated in the first 2 posts of the threads applies to the game at large, but since there are a great deal many more Power Traders that read the forums than there are those controlling the high end markets, a market analysis of “proper pricing” in a lower end, more highly fluid market may be a better discussion.

I’m not trying to get anyone to give away any specific items they’re trading in, because we all know that once that item is leaked as “profitable”, it soon becomes VERY unprofitable.

If anyone has any ideas or theories regarding those lower markets, I’d love to hear them.

Charismatic Harm.9683:

I’m not trying to get anyone to give away any specific items they’re trading in, because we all know that once that item is leaked as “profitable”, it soon becomes VERY unprofitable.

My experience with flipping is that I have to change the items I’m flipping daily. Which means the URL of GW2spidy’s CSV that contains all the up to date TP information, in a form I can easily play with in a spreadsheet, is much more important than knowing which item someone else flips.

www.gw2spidy.com/api/v0.9/csv/all-items/all < The CSV url. If you don’t know enough about spreadsheets to be able to use it, then you do not know enough to play the trading post.

I’m sharing it because it’s a documented part of the GW2Spidy API. That and I enjoyed producing the spreedsheet I use a lot more than I enjoy actually flipping. So I want to reduce the profitability of flipping enough that the lure of gold doesn’t tempt me. Which means sharing all I know.

I am also using GW2Spidy’s API to automatically populate a spreadsheet, but not for flipping. This isn’t really what I wanted to talk about with this thread.

I don’t want to know HOW people are playing the Trading Post. I want to know WHY people that are playing the Trading Post price their items the way they do….and the theories they’ve developed to come up with those prices.

I gave an example of what I thought might be a good strategy for pricing items like Precursors or Legendaries….but I want to know what other people think….not only about the strategy I posted, but also strategies or theories in other types of markets.

@Snoring Sleepwalker
You stated that you’re flipping items. How do you buy/sell them? What’s your strategy? Do you simply buy at 1c above and sell for 1c below, or is there more to it?

To give an example of what I’m doing:
I currently play in a market where I’m able to buy commodities and turn them into something else. Some of these commodities can yield me upwards of 300% profit. The other night, I noticed that one of the items I buy was priced at a point where I could buy out all of the current stock, turn them into something else, and STILL make 150% profit or more.

While this is a special case and doesn’t happen very often, it will happen again if I leave it alone for a while.

Normally I’m looking at items that yield me around 50%+ profit margin. I do this because I value my time. This also allows me to evaluate the current supply and demand and attempt to gain some of the “hidden supply” and “hidden demand”. These hidden commodities are actually what I’m after most often. They’re the ones sitting in someone’s inventory that they haven’t sold yet (hidden supply), or that they want, but the price point isn’t to their liking (hidden demand).

To achieve some of this hidden supply, I evaluate the profit margin at the current buy price. If it’s 100% or more, which several of the things I buy are, I may overcut the existing highest buy order to entice those with items in their inventory to sell them to me immediately. It also closes the gap between the buy and sell price. Once my orders fill, the prices return to normal….until I place another buy order on the same item. Once I receive these items and turn them into the new items, I may sacrifice some more of my profit in order to move them quickly by severely undercutting the lowest sell price. This brings out some of the hidden demand and by severely undercutting the previous price, doesn’t lend itself to undercutting as much. Most sellers won’t sacrifice their profits to undercut me and will just wait until my stuff is sold so they can make more money.

I use these strategies because I feel I can make more money in less time because I can quickly reinvest the money I make to buy more stuff, turn it into something else, and make more money. I’m willing to make less profit more often so I can reinvest it quickly. I never invest in things without a high profit margin to back it up. That way, if the market shifts, I’m still going to make money….and that’s why I’m playing the Trading Post to begin with….to make money.

How is pretty relevant to why – the speed at which you can assess the field absolutely dictates your strategy. Wether you are setting up transactions every few minutes, hourly for 5 hours, or one time per day totally alters the optimal undercut.

Nike.2631:

How is pretty relevant to why – the speed at which you can assess the field absolutely dictates your strategy. Wether you are setting up transactions every few minutes, hourly for 5 hours, or one time per day totally alters the optimal undercut.

You make a very valid point. I guess the reason I said I didn’t want to know “how” was because I was assuming that the people that would participate in this discussion are in the Power Trader category. Those people have spreadsheets, databases, market knowledge and other tools that they use that tell them which items to buy and sell.

To ask the questions that Nike.2631 proposed…..

How do you determine how often to buy and sell….and subsequently….how to price your items for sale?

I’m deep, Deep, DEEP into the casual side of market use. I’ve gotten used to the bizare property that I can put an offer in on just about anything I need on a day to day basis for 1c more than the highest listed offer and it’ll fill within about a minute. Abyss Dye selling for 8.55 gold? I bought in in less than six minutes with an offer just over 5g and only about 3 silver higher than the standing highest offer at the time. Weird, but that’s my experience. Either the power traders have the game wired like an involentary nerve response, or there is something a bit wonky with how the game presents data from the inside… but that’s a different topic .

As a casual seller I have 4 markets I track:
Sigils – because they are a byproduct of my current Ecto-gathering
T5 dust – because they are a byproduct of my Charged lodestone gathering
Mithril Ore – because I have 1000s of shiney rocks from my penchant of harvesting every node in sight while out scouting the daily Oricalcum movements
Mystic Coins – because my gut says that they aren’t gonna stop rising until they reach closer to 40s and the current cycle of little tiny creeps upward are just begging to be arbitraged into bloody submission

First thing to know for context: I’m out in the world killing and mining most of the time. I only come by LA to pick up my sales proceits and manage my inventory 2, maybe 3, times a day. That means I am in absolutely no hurry to get that coin.

I place sell mithril and dust offers randomly during my harvest migrations to periodically clear bag space. Both represent high volume goods so I don’t undercut at all IF the number being offered at that price is high 3 digits or more. If it’s less than say 400 being offered I’ll open a buy order read where the intevitable 1000+ hump is and I’ll either join it, or more often under cut that by 1c – meaing I’m not under cutting at all, I’m overing but at or below the static hump.

Sigils I’ve gotten to know reasonably well across their normal price ranges and have first hand experience with the utility of a lot of them to guide my decisions pricing. I list them for sale basically once per day after I’ve cracked my haul of rares for the day. If there ar 4 or more at the lowest value I’ll join that value. If there is only 1-3 (and the sigil isn’t total litter-box clumps), I will frequently list for higher, because again, I’m looking to pick up my coin tomorrow when I log back in and sigils don’t seem to come into the system fast enough to maintain a steady base. Sometime in the next 24 hours those 1-3 will be gone and I will be the lowest asking price for somebody in a hury.

Mystic Coins…. I just quietly offer +1c best offers to buy in lots of about 10 and watch the market spasm for about seven minutes per gold I’m willing to shell out. I have yet to sell any, but already I’d be making 50% profit or more on every one I release back into the wild.