This is how your buyers are going to act. If someone undercuts you immediately after you post, the next buyer is likely to get their item instead of yours. The one after that, however, is going to have to get yours. What you really want to look at is the number of items that get posted below yours. Most people who undercut do it with a low quantity so that they can more easily cancel and relist auctions while they're stalking the AH. They don't close the loop, though; they don't realize that they spend more time away from the AH than in front of it, and that this time is given back to you once their inventory dries up.
Back in Wrath of the Lich King, I would make a lot of belt buckles. I'd get frustrated when I crafted them only to see the price drop below my target price within a day. Undercutting was insane: on a raid night, my post would last a couple of minutes before it got undercut. I couldn't react by standing there and babysitting my auctions, because it was raid night. I had to raid!
The price before I had to log over to my raiding character was about the same as the price I'd see when my raid finished and I checked before logging out for the night, so I assumed that anything above that price wouldn't sell. I tested this by posting 60 or so at a much higher price, expecting to see them all come back, but they sold! Not all of them, but most of them. I am sure that I was undercut many times that night, but the demand was strong enough that every time the cheap stock sold out, the next few sales went to me.
I experimented with this for a few weeks and found that the higher I pegged my auctions, the fewer I'd sell, but I almost never needed to beat the lowest price on the AH at the time I posted in order to make sales. I picked a price that would sell the quantity I was willing to craft per week, and just fixed it there. I wouldn't make any sales some days, but inevitably on a weekly cycle, I'd sell everything I was able to craft.
This was fine and dandy, but my competitors caught on. They started crafting more and babysitting as much as ever instead of posting just a few at the lowest price, and suddenly we were back to where we started -- my auctions would come back unsold much more frequently. I had two choices: either go back to living with a tiny share of the market because I couldn't babysit my auctions, or lower my prices. I lowered my prices, reasoning that even if I didn't raid, I'd probably be better off spending the time they spend babysitting and stalking competitors getting into some other market.
This worked. As I've said before, lowering the price of something increases the number that sell. When people are deciding whether to buy something or not, there are almost always alternatives. The cheaper something is, the fewer people will elect to substitute a cheaper alternative, have it crafted by a friend, or simply do without.
Now that the prices on belt buckles were about 20% lower than they were before, there was so much more demand that I started to see sales again. A lot of them, in fact. Even considering that I was making about half the profit per buckle at this price, I was making more profit. I had to work (buying mats and crafting) more for the profit, but instead of this being a contest of who could spend more time in the AH, it became a contest of who could buy cheaper and craft more efficiently.
This can be called a "wall" of auctions. The problem with walling is that you can undershoot or overshoot on the price and size of your wall. I've posted a wall of, for example, uncut red gems that were coming out of the seams of my bank, only to sell through them all in a single night and be stuck without enough to use for my crafting on the next big raid night. What I've started doing on certain things I sell is to make my "wall" actually be several smaller walls. On Mists of Pandaria belt buckles, I'll post a large number at my wall price that I know sell reasonably, but since the materials are cooldown based and I'm vulnerable to being completely bought out for a reset, I'll keep 30% of my stock up for maybe 50% higher than the main group.
Resets are a post in and of themselves, but for the purpose of this article, essentially it's when you notice that all your items sell to a single person in a single sitting, usually a competitor's character. It's most common on items where there is either a cooldown or some sort of natural limitation on the materials. This is an opportunity for everyone else to profit, as the resetter has to buy a lot of items to create a shortage of inventory among their competitors. Think of it like an immediate surge in demand -- if you can normally sell 100 of something for 500g each a week, a resetter while they're actively trying to reset could make that 300 at 750g. Having a portion of your inventory up for higher than the rest will pay dividends once the demand pushes the price up that high. It may rarely be due to normal players, but it makes resetting more expensive.
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