A puzzle for you.
I came across this situation at 8am, after a long night of gem dealing. Cut gem prices were very slow to sell all night but were maintaining a high price at 150g all night, until 7am, when a rogue trader entered the market and began undercutting cut gem prices by 1c every 5 seconds. Cut gem prices were rapidly falling from their night long high, and were plummetting towards the cost of the raw uncut gem.
What would you do if you saw this situation
Cut gems
149 99 97
149 99 98 (yours)
149 99 99
150 00 00 (yours)
151 478 99
151 49 00 (yours)
155 00 00 + a dozen or so Other Sellers
Uncut gems
149 00 00
Uncut gems usual price
100 00 00
What would you do?
What do we know?
Uncut gems usual price is 100g. Due to high supply of the uncut gems, within two hours the uncut gems supply will have fallen to the usual price of 100g. With the fall of the uncut gems to 100g, cut gems will fall to 110-120g maximum.
Your competitor has just woken at 7am, ready for a long day ahead of gem trading. He has little patience, wants to throw his expired auctions on the AH and get on with his game. You, on the other hand, have been awake all night, and are ready for a good night kip, and must sell your cut gems at a profit.
If you don’t sell your gems now, then it is likely that your prices will fall from 150 ish to 100 ish when you log back in. That’s a huge drop 150 to 100g.
What did I do?
I scared the competitor away using AH pvp.
Cut gems
120 00 00 (yours)
149 99 97
149 99 98 (yours)
149 99 99
151 478 99
The problem is that 120g looks like a deep LOSS. I’m offering for sale the cut gem below the cost of the uncut gem. The competitor CAN NOT compete with this. He thinks I’m crazy! He refuses to undercut below the uncut gem price.
I bought all my uncut gems at 100g, so 120g is a profit for me. I have another 3+ stacks of gems ready to cut.
The competitor leaves the market. He stops undercutting me.
I wait 5 minutes. There is no reaction. The morning is progressing. I know that buyers will soon be arriving in the Auction House ready to pick up new gems. I cannot risk that 120g gem staying there for long. I post the rest of my gems:
Cut gems
120 00 00 (yours)
149 99 96 x 20 (yours)
149 99 97
149 99 98 (yours)
149 99 99
151 478 99
Conclusion:
The 120g cut gem sells to someone who thinks they are lucky that they paid under the cut gem price. (I made 20g profit.)
Uncut gem supply increase, and the uncut gem price slowly lowers to 100g over the course of the day. (It wobbles around 100-140g for the next week.)
My competitor was scared away, he held back from selling at the moment.
My 20 x 149g 99s 96c gems all sold.
The price of the cut gems then held steady at 150g.
My competitor had the opportunity to then post his gems at 150g later in the day and make his profit.
I made my profit. He made his profit.
Summary
I was relieved to be able to sell my cut gems at a good profit. If I had not placed that fake undercut gem, then my gems would all have been 1c undercut, and I would not have made any sales.
I was glad that my gems all sold quickly at a high price, and left the buyers wanting more.
Because I only posted one warning shot, faking a deep undercut with the 120g, the other sellers backed away for a moment, allowing me to get rid of my stock.
As soon as my stock was gone, the prices reverted to the high 150g price.
A week later, the cut gem prices are still at 150g .. more or less.
About the Author
The Gold Queen is written by Alyzande. With many level 100s, 9 years expertise in making gold, 10 garrisons, 16k achievements, 1505 days played, and over 18m gold earned. The Gold Queen blog teaches you how to make gold playing World of Warcraft using ethical trading, auction house flipping, crafting, reselling snatch lists, and farming gold making.
