QA3 or Auctioneer?

The title is a long debate, especially on glyph front. Now I try to give a general advice when to use the first and when the second. Actually we are not even talking about the two addons, we are talking about two pricing strategies:

• Undercutting a bit to the current seller, no matter how much he sells for (within a threshold-fallback range)
• Sticking to the long-trend market price, no matter how much it is (with a 10-20% undercut range).

If you know anything about economics, you know that the second is not just superior, the first is plain stupid, and theoretically no one should use it. Yet it is widely used, including by people who gain huge amount of gold. I've been using both for couple of months now and can tell exactly how can the "stupid" be better than the "optimal": it depends on the imperfection of the market.

On a near-perfect market, buyers and sellers know the prices. The trading happens on the equilibrium price. You sell if you have something that cost you (or currently worth you) less than the equilibrium price, buy if you need something more than you need its price (alternative products from it). The profit comes from efficiency: by being efficient you can get materials and worktime cheaper than the equilibrium price.

On an imperfect market people have no idea about the prices and what the price they are asking and giving is largely random. Profit comes from arbitrage and abusing M&S: you buy low from some dumb and sell high to another.

If the market would be perfect in WoW, people would all accept the equilibrium price, it would only depend on supply and demand. Everyone would use auctioneer. The market is never perfect, not even in real life. In WoW, where even "i farmd for free" kids are significant factors, it's often far from perfect.

The decision between QA3 and Auctioneer depends on the perfection of the market. If the M&S is an exception, use Auctioneer. If the M&S is the rule, use QA3. Before you'd say "the M&S is the rule on every servers", remember that not the number of people but the buying/selling power count. If there are 3 intelligent sellers playing with 10K gold on that field each and there are 50 punks, paying-expecting 10-50G from the same market, the market is near perfect.

How can you be sure that a certain market is near-perfect or terrible? From the G/hour available to the public. If it's low (300-600), it's a near-perfect market. If it's high, it's ruled by M&S. The "to the public" in the previous sentence refers to rare drops, rare recipes and "on-CD" items that your competitors can't mass-produce.

Crystallized fire can be produced from eternal fire with a click work by anyone. A Dalaran-sold pet can be bought by anyone with a click. A single arrow can be "produced" from a stack with the selling interface without effort. These are typical M&S markets where the equilibrium profit should be 0. No point trying to stick to the market price, reap whatever insane price you can, use QA3.

However if cut gems are in the range of the uncut, it's near-perfect. You should use auctioneer to keep the equilibrium price if some "farmed for free" kid is posting below mats or some wannabe millionaire monopolist bought everything up and selling 2x equilibrium. If you just undercut him by a copper, the next seller will undercut you anyway. The old equilibrium price proves that there are many competitiors.

Using the above logic falls only one market: glyphs. If you look at the 1000% profit (4G mats, 40G price), you say it's an M&S market, so 1c undercutting is the proper move. However there are often campers who are not M&S and - despite they sell only a few items a time - are representing a near-infinite selling power. You will not sell anything with QA3 since they undercut you the second you log out. The proper action here therefore Auctioneer, or manually configuring QA3 to cut deep under them.

Auctioneer shall be used also when you are oblivious to the price. This is typical with "whatever crap dropped during questing". You should not research the market of "pants of the eagle" but nor shall you sell it 88.99 just because some punk listed it for 89. Use the long-term market price here.

So the question before you choose your pricing method is: "am I competing with intelligent people or M&S?"