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The reason behind deliberate price dumping

Author
Gavon Kane
Aegis Security Consulting
#1 - 2012-09-09 09:19:08 UTC
I have just started trading with this character and while station trading is by far the most profitable thing I have done in Eve there is a phenomenon that kind of puzzles me: Let's say you have found a product that gives you a fairly reasonable trade margin and has a decent rate of turnover. Now you can go on and trade this product for a couple of days and then someone is bound to either raise the buy order or lower the sell order to the point where the product is barely profitable when you take fees and taxes into account.

I have two questions about this:

1. Why? Is this just some kind of trolling? Or are people trying to manipulate the market in their favor? If it's the latter I fail to see the point, since they themselves buy too high or sell too low. Or is this part of some market scam, I have yet to uncover?

2. What do you do when you encounter this? Do you just cut your losses and adjust your orders accordingly, so you have free cash for new products? Or do you try to sit this out and hope not too many traders will place their orders above yours?

Just to be clear about this : this is not a whine post. I 'm just learning the ropes of station trading and I'm interested in understanding the workings of the market.
Tom Hagen
Twilight Empire
#2 - 2012-09-09 09:59:09 UTC
3 Reason comes to mind that at least are true for me.

If you are a manufacturer, often when some goods are fluctuating in price it can be to my advantages to stabilize it.
If you are lazy and kind of rich, you find yourself manufacturing everything on max runs, with the queue times in the station there can be a substantial time between starting the production and getting the items on the market.

Also if the item can be bought under production cost and I happen to have it in stock, I cant compete with those pesky traders that are buying it for below cost, they are just interested in the spread. While I have to factor in mineral cost. Often I can but up an buy order close to mineral cost. That way I ensure my self that a trader cant sell for less price than me.
If I get excess I just stop producing it and use my production somewhere else, and since I bought it close to mineral price, I can always refine and produce something else.

When you start dealing with a few millions (being modest) and if you still are lazy. In my case at least isn't always that interesting to try and maximize every trade. Instead you use the BPO you have and bends the market to your will instead. Often that can result in very low profit margin. Especially in the module market. But 4-5% profit overall on enough money can still be satisfying if it mean you can keep on being lazy.

I don't have time or interest to keep up with somewhere around 200 items, I win some and I lose some. If I find an item falling out of range I often just put up an buy order.
Debra Tao
Perkone
Caldari State
#3 - 2012-09-09 10:15:56 UTC
As a trader i see several reasons :

1- playing the 0.01 ISK war means that i won't have a high volume on the item because i just don't have the time to undercut all day long. So i prefer having a high reinvestment rate than a high margin, in my case i know it's better. Of course i will undercut by 0.01 ISK if the activity is very low on the item.

2- Manufacturers don't want to sit in a station all day long undercutting traders. So if they can make profit by selling their stuff for a cheaper price some will go for it. Again, they can reinvest the money quicker by doing so.

3- If the price is fluctuating, like when a faction hits T5, it's sometimes better to go a quick low profit than try to go for the high risk big profit.
iskflakes
#4 - 2012-09-09 10:21:13 UTC
We do it to squeeze out little guys like you. I am happy with 2-3% on an item. Multiplied by 2000 orders on several trade alts and it adds up quickly.

-

Sevastian Liao
DreamWeaver Inc.
#5 - 2012-09-09 10:33:05 UTC
From the perspective of a manufacturer, I've found that certain items that I manufacture have production costs well below the average prices for the item in the trade hubs. I'd vastly prefer to be back in my region coing about my business instead of being at a hub 0.01 ISK-ing all day, so for me the opportunity cost of hanging around to do trades is a lot higher than taking a lower profit (I still make sure that I'm making a healthy profit above production cost).

There's another factor to take into account when discussing my opportunity costs - ISK tied up in the form of goods sitting on the market is ISK that is not spent doing other potentially profitable trades, or ISK that is going into my next production batch. I'm always fully invested - But that does also mean that cash flow is a perennial problem. By lowering my sell orders to what you would consider an "unreasonable" degree, I encourage bargain hunters to quickly snap up my order, allowing me to put the ISK to other uses.

A lot of items that aren't end products could function based on the same view of opportunity cost. If I set up a higher buy order for a material that I'm intending to use for manufacture, for example, I could be making a profit off selling the end product even with my higher buy orders - Trading profit for that one particular commodity isn't as big an issue for me as compared to the opportunity cost of a production line sitting idle for lack of minerals.
Gavon Kane
Aegis Security Consulting
#6 - 2012-09-09 12:42:32 UTC
iskflakes wrote:
We do it to squeeze out little guys like you. I am happy with 2-3% on an item. Multiplied by 2000 orders on several trade alts and it adds up quickly.


So what you are saying is basically that you cut your profits heavily (since you have 2000 orders on multiple alts) in order to cut other people's losses slightly, who don't have nearly as much ISK locked up in the market. Sounds reasonable.

To all the others: Thank you. The comments were very insightful.
Cheeba Don
The Scope
Gallente Federation
#7 - 2012-09-09 13:11:17 UTC
I wrote about this once. trader pvp
Kara Books
Deal with IT.
#8 - 2012-09-09 16:38:49 UTC
iskflakes wrote:
We do it to squeeze out little guys like you. I am happy with 2-3% on an item. Multiplied by 2000 orders on several trade alts and it adds up quickly.


Pretty much that ^

Remember, everything happens for a reason, Even you posting this to the public, HAS a reason, Either to atract more little guys because you already realized this or as a plea for some big guy up there to stop, or who knows, whatever the reason is.

THERE IS ALWAYS a reason for everything, Become a market atheist, Ask yourself why everything happens and then figure out the reason.

Faction items are a Roller coaster, the battleships jump from 200 to 600, I don't bother with an item like this once it hits 385, because thats just me, I cut costs and risks whenever and wherever I can, my reason is simple, Hard to single my trade patarn out and cause damage.

Over the time iv bin playing, iv lost a total of 46M isk to failed manipulation attempts and bad or unlucky decisions like that, play it smart, then it give you the power, knowing you can never be booted from the seat while eating your little tiny slice of the pie you have cut out for yourself.
serras bang
Caldari Provisions
Caldari State
#9 - 2012-09-09 18:40:42 UTC
me i just get really really anoyed at someone playing the 0.01 isk game tht i drop the price dramaticaly to anoy em i make hugh profit margins on my stuff anyway.
Dramaticus
State War Academy
Caldari State
#10 - 2012-09-09 19:43:35 UTC
You run bots out of the market doing this too

The 'do-nothing' member of the GoonSwarm Economic Warfare Cabal

The edge is REALLY hard to see at times but it DOES exist and in this case we were looking at a situation where a new feature created for all of our customers was being virtually curbstomped by five of them

joyous the
Slippery Penguin
#11 - 2012-09-09 22:37:33 UTC
or just look at it as an opportunity to pick up stock for cheap.
MinefieldS
1 Sick Duck Standss on something
#12 - 2012-09-09 23:00:14 UTC
When somebody undercuts me by 0.01 isk I undercut them by 1 mil for the lulz
Stigman Zuwadza
Deep Core Mining Inc.
Caldari State
#13 - 2012-09-09 23:24:50 UTC  |  Edited by: Stigman Zuwadza
I lulz at those people dropping prices dramatically due to 0.01 iskers.

I lulz even harder when I 0.01 isk someone thats just dropped the price dramatically on something I'm selling. I'll match any plonker with a friendly 0.01 drop if they wanna play silly buggers. Big smile

All this does is show your lack of metal when it comes to market pvp or a lack of understanding of the item you're selling. Granted, as mentioned above there are some valid reasons for big drops but most of the time its fustrated players that can't handle being 0.01'ed.

Did-dums... Big smile

I'm guessing most 0.01 iskers get just as fustrated when you wipe a shitton of profit of an item, but for others its just how it is and they get on and keep 0.01 isking.

Fly safe. o7

It's broken and it's been broken for a long time and it'll be broken for some time to come.

Daniel Plain
Doomheim
#14 - 2012-09-10 01:47:41 UTC
MinefieldS wrote:
When somebody undercuts me by 0.01 isk I undercut them by 1 mil for the lulz

when i get undercut by a million, i just buy the batch then sell it for 999999.99 profit

I should buy an Ishtar.

LuckyQuarter
Eden Dominion Coalition
Scary Wormhole People
#15 - 2012-09-10 01:52:12 UTC
There are different trading styles or philosophies for maximizing market profits. One way is to focus on maximizing sale prices and moving the market avg up over time, another is quick optimization of profit margins across dozens of potential trade items, and lastly there is the tried and true Monopolize the market for a single item regardless of profit margin approach.

When traders become frustrated with each other, it's nearly always because they are using different philosophies that are interfering with each other. It's not that uncommon for traders doing well in the market to get eve mails from other traders asking them to modify their play style.

Just keep in mind that just because something doesn't make sense to you - doesn't mean that it isn't making sense to them.

JohnathanGalt
Northern Sky Industries
#16 - 2012-09-10 12:38:58 UTC
Daniel Plain wrote:
MinefieldS wrote:
When somebody undercuts me by 0.01 isk I undercut them by 1 mil for the lulz

when i get undercut by a million, i just buy the batch then sell it for 999999.99 profit


This. Just did this the other day. Some hotshot placed a bunch of a faction ammo on sell orders for less then I usually buy it for. Thanks for saving me the transport costs! Then he did it again, and I bought that. Then he dissapeared, probably frustrated that he is not making any money trading. You cannot be afraid to use isk to defend the floor of your items if you are confident you can support that floor. The profit off this item purchased from this guy is now over 50m isk.... thanks again!
Rhat Dakota
Paksenarion Dorthansdotter
#17 - 2012-09-10 18:54:27 UTC
One thing I don't think you have considered is missioners. I know I don't sell more then once every couple of months and the price really doesn't matter, just want to make sure everything moves in a timely manner. Quite possibly they are happy with the lower price, and just want to get back to running misions.
Good for me and good for you. Everyones happy
Sun Win
#18 - 2012-09-10 20:57:43 UTC
Here's another reason: sometimes the prices between regions fall out of sync. You can quickly buy up from the low region and sell in the high region. You do this quickly because you're not the only one who noticed. To people in the high region it looks like selling at a loss but you're actually selling at a huge profit.
Xylorn Hasher
Caldari Provisions
Caldari State
#19 - 2012-09-11 22:49:37 UTC
Sun Win wrote:
Here's another reason: sometimes the prices between regions fall out of sync. You can quickly buy up from the low region and sell in the high region. You do this quickly because you're not the only one who noticed. To people in the high region it looks like selling at a loss but you're actually selling at a huge profit.


^This^

I just read a post of being satisfied by making 2-3% Lol?
I do little trade on alt cuz i cant visit hisec anymore and i just sent it to Jita for shopping for 2-3 Bils then return and deploy the goods on local mission hubs / mining hubs.

My profits are 30 - 50 % constantly sometimes more than 100% if i hit the spot and i do trade run one or twice per month. So there is plenty of time to hunt ppl in lowsec, but...
man 2-3% profit?
You are wasting your life...

All my posts are made shortly after Marihuana consumption.