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Handling of absurd market resets.
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Valdearg Dragonblood
The Scope
Gallente Federation
#1 - 2012-08-23 16:24:53 UTC
So several items in my market portfolio underwent a market reset recently. Whoever did the reset set the prices of those items absurdly high, like between 2000% and 5000% above the typical market conditions, depending on the item in question. Obviously, I was eager to take advantage of that reset, but I struggled with what I should set the price to.

As you know, many times when a market is reset, the price rapidly drops back to a more reasonable level, especially if the original reset price is insanely high. My original thought was to just .01 isk it, but I hesitated because if I didn't sell at least one or two of the items at this outrageously high price, I'd be on the hook for broker fees and taxes worth more than my expected profit on the entire stack of items at the typical market prices. I really didn't want to risk that, so I ended up putting up the items at a more modest 800-1200% market value, instead. Less broker's fees/taxes to risk and hopefully faster sales to ensure a significant profit, rather than hoping that I sell one at an absurd price before people come in and crash it down (yes, I know that I contributed to the inevitable crash with my conservative market play).

Anyways, my question to you far more experienced folks is this: When faced with a scenario similar to this, what would you do? Would you .01 isk it and risk no profit at all for a huge reward? Or would you play it more conservatively, risking less in fees for a far more likely, but significantly smaller profit?
JohnathanGalt
Northern Sky Industries
#2 - 2012-08-23 16:56:52 UTC
Valdearg Dragonblood wrote:
So several items in my market portfolio underwent a market reset recently. Whoever did the reset set the prices of those items absurdly high, like between 2000% and 5000% above the typical market conditions, depending on the item in question. Obviously, I was eager to take advantage of that reset, but I struggled with what I should set the price to.

As you know, many times when a market is reset, the price rapidly drops back to a more reasonable level, especially if the original reset price is insanely high. My original thought was to just .01 isk it, but I hesitated because if I didn't sell at least one or two of the items at this outrageously high price, I'd be on the hook for broker fees and taxes worth more than my expected profit on the entire stack of items at the typical market prices. I really didn't want to risk that, so I ended up putting up the items at a more modest 800-1200% market value, instead. Less broker's fees/taxes to risk and hopefully faster sales to ensure a significant profit, rather than hoping that I sell one at an absurd price before people come in and crash it down (yes, I know that I contributed to the inevitable crash with my conservative market play).

Anyways, my question to you far more experienced folks is this: When faced with a scenario similar to this, what would you do? Would you .01 isk it and risk no profit at all for a huge reward? Or would you play it more conservatively, risking less in fees for a far more likely, but significantly smaller profit?


What I do not understand is how your broker fees and and taxes could potentially "wipe out" your profits from the other items should they sell low again. If you even sold one of these items, you would cover all ancillary expenses. Also, I always just play the 01.isk game, why would you leave profit on the table? If you bought something for 100isk, and it is selling for 40,000isk, if you put it up for 20,000 isk, it does not change the system AT ALL, the next person is just going to put it at 19,999.99, so essentially everyone just had 20k chopped out of the profit. The only case where your strategy works is if you can drive the sell price under what is costs others to acquire the item to sell.
Bath Sheeba
Another Success Story
#3 - 2012-08-23 17:04:50 UTC
I dunno. I usually attempt to determine what I want most:

Maximum profit
Maximum speed

Profit and speed are a trade off. You can give up profit for increased speed, or give up speed for increased profit.

When I sell modules I make I tend to 1k isk them. That is to say when I get someone .01 isk me I drop to the next 1k ISK barrier. This does 2 things: 1. It decreases the chance of being .01 ISKed as quickly; 2. it drops the price, and thusly should increase throughput. These are more important that maximum profit off these items to me as I make a set amount weekly, and do not want to get a large backlog, as that will give me less liquidity and make it harder to utilize my money for other purposes (material purchases, market buy/sell, pvp ship purchases, PLEX etc.)

I know I leave potential profit on the table, but since I already have a hefty profit off of the manufacture and sale of those items, I am willing to get 2-5% less than the best I could to keep my liquidity high.
Valdearg Dragonblood
The Scope
Gallente Federation
#4 - 2012-08-23 17:09:28 UTC  |  Edited by: Valdearg Dragonblood
JohnathanGalt wrote:
What I do not understand is how your broker fees and and taxes could potentially "wipe out" your profits from the other items should they sell low again. If you even sold one of these items, you would cover all ancillary expenses. Also, I always just play the 01.isk game, why would you leave profit on the table? If you bought something for 100isk, and it is selling for 40,000isk, if you put it up for 20,000 isk, it does not change the system AT ALL, the next person is just going to put it at 19,999.99, so essentially everyone just had 20k chopped out of the profit. The only case where your strategy works is if you can drive the sell price under what is costs others to acquire the item to sell.


Well let's assume that none of my items sold at the new level, which is a real possibility, considering I can't camp the market 24/7, and a 5000% profit margin is going to attract competition faster than you can imagine. So I post the items and pay, say, 5 million in brokers fees/taxes. Come home from work to find that none of them sold, and that prices have dropped back down to realistic levels. At that realistic level, I only make 3 million in profit from the entire stack.

Even though I sold every item for more than I paid for it, I lost money. That's a very real possibility if I were to post at that absurdly high price. One that carried enough risk that it scared me away from .01 isking that particular reset.

Sure, if I sell even one item at the high level, I'm in the green, no matter how low the price drops, but at a price like the ones that were posted, 99% of the people who would normally purchase the item would think twice about it. Combine that with the increased competition that the reset brings, and suddenly you've got a very real chance of losing money.

Though, I suppose part of this game is taking the risk, I suppose. I just tend to be a risk averse guy. I'd prefer lower risk situations over high risk high reward ones.
JohnathanGalt
Northern Sky Industries
#5 - 2012-08-23 17:14:19 UTC
Fair enough, however I disagree with your on one major point, that price drives sales. In EVE, unlike the real world,price has very little to do with demand. There is no Amazon that will deliver to your door, if you are in a backwater system, your choices are to pay the inflated price on limited inventory or fly somewhere more populated, which almost never happens. People pay the lowest price available on the stock that is where they are. Why else would I be able to mark up a simple cloaking device over 500K isk from Jita, if price was the main consideration, everyone would just fly to Jita. My guess is that just as many items would sell at 400K as 200K, the difference in price is VERY minor to most EVE payers.
Valdearg Dragonblood
The Scope
Gallente Federation
#6 - 2012-08-23 17:18:34 UTC  |  Edited by: Valdearg Dragonblood
JohnathanGalt wrote:
Fair enough, however I disagree with your on one major point, that price drives sales. In EVE, unlike the real world,price has very little to do with demand. There is no Amazon that will deliver to your door, if you are in a backwater system, your choices are to pay the inflated price on limited inventory or fly somewhere more populated, which almost never happens. People pay the lowest price available on the stock that is where they are. Why else would I be able to mark up a simple cloaking device over 500K isk from Jita, if price was the main consideration, everyone would just fly to Jita. My guess is that just as many items would sell at 400K as 200K, the difference in price is VERY minor to most EVE payers.


You make a good point. However, my the items I sell are easily accessible for far cheaper anywhere from 2 to 5 jumps away from the system I work in. I'm relying on people's laziness to make my money, haha. And when the price jumps that severely, many times their desire to not pay a ridiculous price beats out their laziness.

Would you pay 100m for an item when you can buy it for 100k two jumps away?

Edit:
I should clarify that I absolutely agree with what you said for 99% of the items in the game. I have a number of other items that I work in where that is true. Just as many units sell for 1m as they sell for 100k. I particularly love when those markets are reset, myself. :P
Maggie Dezno
Center for Advanced Studies
Gallente Federation
#7 - 2012-08-23 17:35:00 UTC
noob here. what is meant by a 'market reset'?
If I had to guess, I'd say it's when all the sell orders (or buy orders, or both) get fulfilled and you get to choose the price you're going to list something at?
Valdearg Dragonblood
The Scope
Gallente Federation
#8 - 2012-08-23 17:36:04 UTC
Maggie Dezno wrote:
noob here. what is meant by a 'market reset'?
If I had to guess, I'd say it's when all the sell orders (or buy orders, or both) get fulfilled and you get to choose the price you're going to list something at?


It generally means that prices fell low enough that someone decided to take a risk and buy out the remaining sell orders to relist them at a much higher price.
Gaius Clabbacus
Control Alt Delve
Goonswarm Federation
#9 - 2012-08-23 17:47:40 UTC
If it is an item with a nice enough margin to be worth my time I'd 0.01 isk it until I got tired of it. When logging off put an order at the half-way point so that nobody gets to 0.01 isk me while offline. Depending on the item and which hub you are playing it may be worthwhile to put up small stacks (up to a days worth) to encourage people to sit out your order and hope for higher margins..
Vincent Athena
Photosynth
#10 - 2012-08-23 20:18:56 UTC  |  Edited by: Vincent Athena
You could just list one or 2 items at the real high price. Do not put up the entire stack until the price drops.

Edit: This brings to light a feature I wish we had, the option to update quantity when we update an order.

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Valdearg Dragonblood
The Scope
Gallente Federation
#11 - 2012-08-23 20:21:54 UTC
Vincent Athena wrote:
You could just list one or 2 items at the real high price. Do not put up the entire stack until the price drops.


Shocked Wow. This is what I get for doing this stuff early in the morning. I didn't even think of that, hahah. Such a simple solution. I pay more in fees on those, but if they don't sell, oh well, it's not like I can't make it up.

This will likely be my strategy from now on.

*head-desk*
Totally Trustworthy
Doomheim
#12 - 2012-08-23 20:36:52 UTC
A lot depends on whether you view this as a market pvp opportunity. You know the price the guy bought everything out at, so you know his minimum required sale price to make any profit at all. Assuming you were able to acquire the goods below that price and make a profit before the reset, you've got the advantage in this scenario. You know how and/or where to get the items at the best price. Personally, I would put up a stack or two for .01 combat for as long as I could be at the computer or check in regularly. When you're ready to move away from the computer for a while, put up the main stack(s) at near the original price. If you get greedy and try to ride the markup, you'll encourage fringe cases (e.g. people willing to go 5 jumps) to go elsewhere and you both lose out. A tactic I've often used is to peg his order up high (using a bracketing price technique) but then introducing 1 or 2 item stacks well below that to try and pickup a little extra profit and cut his sales volume. Small stacks go really fast because people see the much lower price and think its the last of a good deal. If they move fast enough and he isn't checking market price history info, he might not even notice you're doing it.
joyous the
Slippery Penguin
#13 - 2012-08-24 01:45:25 UTC
The problem with your logic of intentionally crashing a market to "sell product" is have you ever been in a position where you see a product a few jumps away for a few hundred k lower and actually made that trip? Have you ever been trying to fit out a ship and you choose an inferior meta item because the item you need has been adjusted a bit? Unless you're hobo poor the answer is no. Product moves at the price the product is listed, because people simply do not want to invest the time to seek cheaper products nor make due with inferior ones. While the few days after a market has been adjusted will see lower volume moved as the shock to the market keeps buyers initially away, however once the price has been stable for a few days volume moved returns to normal. Gouging the price is only gouging your potential profit where as it's generally still making a profit for the market adjuster to simply just match your price.
Valdearg Dragonblood
The Scope
Gallente Federation
#14 - 2012-08-24 15:40:07 UTC  |  Edited by: Valdearg Dragonblood
joyous the wrote:
The problem with your logic of intentionally crashing a market to "sell product" is have you ever been in a position where you see a product a few jumps away for a few hundred k lower and actually made that trip? Have you ever been trying to fit out a ship and you choose an inferior meta item because the item you need has been adjusted a bit? Unless you're hobo poor the answer is no. Product moves at the price the product is listed, because people simply do not want to invest the time to seek cheaper products nor make due with inferior ones. While the few days after a market has been adjusted will see lower volume moved as the shock to the market keeps buyers initially away, however once the price has been stable for a few days volume moved returns to normal. Gouging the price is only gouging your potential profit where as it's generally still making a profit for the market adjuster to simply just match your price.


In this case, I wasn't intentionally crashing a market to sell quickly, but rather being hesitant to post as such an absurdly high price simply due to the broker's fees and taxes involved and the likelihood that the rabid competition in Jita would crash the market quicker than I could sell one unit. I think I've got both Broker Relations and Accounting at IV (if I don't, then they will be there sooner than later), and the fees/taxes I would have paid would have been significantly larger than my expected profit at typical market levels for the entire stack. (Of course, as you can tell from my previous post, I failed to think that I could post less than the whole stack, haha. >.<)

I have, in the past, taken a price gouging approach to dissuade competition and hopefully sell faster. However flawed the logic in that strategy is, it worked for me. On days where I .01 isked, I barely sold anything. On days where I gouged and managed to stave off competition, I was able to sell far more. This approach was due mostly to my lack of liquidity at the time. However, nowadays, I'm much more liquid than I was before, and have settled into some markets where I can turn a profit without too much difficulty, so I've modified my strategy and am quite content .01 isking.

It was just that, in this case, the potential costs of .01 isking this particular reset made me hesitant to post my orders at that high a level.
Beckie DeLey
Garoun Investment Bank
Gallente Federation
#15 - 2012-08-24 23:27:12 UTC  |  Edited by: Beckie DeLey
If i have stock for an item that just got bought out, i usually try to "encourage" the guy who reset the market to buy my stock, meaning i heavily undercut them, but still stay above the average. I am no longer trying to sell to the consumers, but to the other trader.

My siren's name is Brick and she is the prettiest.
Herr Hammer Draken
#16 - 2012-08-27 22:50:06 UTC  |  Edited by: Herr Hammer Draken
joyous the wrote:
The problem with your logic of intentionally crashing a market to "sell product" is have you ever been in a position where you see a product a few jumps away for a few hundred k lower and actually made that trip? Have you ever been trying to fit out a ship and you choose an inferior meta item because the item you need has been adjusted a bit? Unless you're hobo poor the answer is no. Product moves at the price the product is listed, because people simply do not want to invest the time to seek cheaper products nor make due with inferior ones. While the few days after a market has been adjusted will see lower volume moved as the shock to the market keeps buyers initially away, however once the price has been stable for a few days volume moved returns to normal. Gouging the price is only gouging your potential profit where as it's generally still making a profit for the market adjuster to simply just match your price.


Huh I shop around for best price on the stuff i buy all the time. I will go up to 6 jumps away to get the best price. But that must just be me. I have often bought a lot of extras of what ever I am buying if I can get it 30% cheaper nearby and bring a load back to sell at my home station. I can usually sell enough of it at a markup to off set the cost of the product I used for myself.

My favorite tactic (because 3 regions are inside of 6 jumps) is to buy stuff from other regions close by and move it to my home station for sale. I have made quite a bit of spare isk doing this.

Herr Hammer Draken "The Amarr Prophet"
Tom Bithoff
OSG Planetary Operations
#17 - 2012-08-30 15:35:00 UTC
Valdearg Dragonblood wrote:
... what would you do? Would you .01 isk it and risk no profit at all for a huge reward? Or would you play it more conservatively, risking less in fees for a far more likely, but significantly smaller profit?


The answer depends entirely on how often you update your orders. If frequently, .01isk them. If not, your only competitive advantage against those who update more frequently is a willingness to take a smaller profit. The argument against cutting the margins, that someone will always .01isk you anyway, is simply not true in the long run.