Some people are confused about Market PVP…

So following one of the comments on Gordon of We Fly Spitfires’ post about money making in EVE, I found a EVE trading blog called Small Time Trader with a post that gave me some insight on wtf some traders are thinking when they post silly undercuts/overbids.

It’s still misguided, mind you, but at least there’s some idea of what they are trying to accomplish.

Alex Vindaloo gives an anecdote about how he “played” with another trader who had a good market going in a particular ship module, and eventually how by increasing his buy order prices to levels much higher than what they were before, he made things tough for the original trader. Cue salty tears etc…

What is winning

First lets think about what it means to PVP successfully. My definition of it is to engage another player in competition and win. Winning means I have bigger gains/smaller losses than the other player. When most people think of market PVP they probably instinctively think of the evil giant monopolist, who is humbled by a mom and pop store opening that brings down prices to “reasonable” levels which benefits everyone, including that nearby orphanage in which lives a girl who lost both parents, 2 legs, 6 fingers and 1 nostril to a household fire. You get the gist. The small store wins through using hard work, better efficiency, and mom’s apple pie.

However, such a scenario can’t exist in EVE. Your item is the same as everyone else’s. Your costs are the same as everyone else’s (don’t even start on “I mine all my minerals so they’re free”). You can’t “force” anyone out of the market. They can only leave of their own volition. The other trader didn’t leave because he took huge losses and couldn’t maintain his operations/pay his staff. He left because the margins became bad enough that he could make more money elsewhere.

Let’s think about that for a minute. He went somewhere else where he could make more money. You, the “winner”, are left in control of the market for an item that makes less money.

Yes, by undercutting/overbidding strongly you can destroy a market. You can reduce the profit margins of other traders to the point where they leave (for greener pastures). However, this is the equivalent of celebrating being hired at McDonald’s because you’re the only one left who’s interested in working for minimum wage.

If at this point you’re thinking that you can now raise prices back to profitable levels since you’re in control, think again. Unlike WoW, there are no professions in EVE. A jewelcrafter in WoW can’t suddenly start trading in flasks. In EVE, any daytrader can come into any market at any point in time with absolutely zero entry costs. Once you raise prices back to profitable levels, the original trader can just come back, 0.01 your buy and sell orders and be dominant once again. Just like you, he doesn’t sustain any losses, just lower profits for a time.

Going back to the original definition of PVP, you can’t have higher gains/lower losses than your competitor. He can always 0.01 you for practically the same profit you are satisfied with making. He just chooses not to because at some point it’s no longer worth his time. Calling this “successful PVP” is like saying “suicide bombing is an effective way of winning 1v1 duels”. You took away a potential profit for the other trader, at the expense of the exact same potential profit for yourself. The only element of winning in this is that you have the last buy order up, kinda like getting the last word in on those arguments we have with our siblings when we were 9 years old.

I suspect that some of these traders just have some irrational gratification from undercutting/overbidding in biggish jumps. Kind of like a “see how tough I am? 50k ISK raises for me, not this 0.01 stuff!” smirk around the poker table. I mean, wow, 10k ISK undercut on a 17 million ISK sell order, damn what have I gotten myself into here, I’m clearly playing with the big boys now. I admit that I do get slightly annoyed when people halve the margin on an item, but it’s more of a “not these idiots again” kind of annoyed than a “oh noes what ever will I do now” kind, since I can just move on to another market immediately. I still have my stock, I can either liquidate at the now reduced profit margin or just hold on to sell when the market recovers. No big deal to any trader.

Lower prices = Higher volume? Not necessarily

And for those thinking that lower prices lead to higher volume? I’m not so sure on that one. The buy and sell order system in EVE essentially imposes a soft floor and cap on item prices, meaning that short term fluctuations are only going to be on the margin. This means that the fundamental value of the item doesn’t move much, only the margin between the buy and sell orders.

So… is DarthVader going to go on the market, see some ship module that was selling for 13 million ISK yesterday being sold by some undercutter for 12.5 million ISK now and go “holy crap I’m going to buy myself 10 of these, I couldn’t afford them before but now I can!”? Add to this that EVE doesn’t really have consumables, so if people were going to buy a ship or equip a certain module, they would have already done so if the price was around the expected level. They’re not going to switch to using a more expensive module just because it’s now 4 million instead of 5 million. The only way you get higher volume on low sell orders is probably from other traders buying out your discounted goods and reselling them for free money.

So 0.01 all the time?

However, after saying all that there do exist some instances when it would be better to undercut/overbid by more than 0.01. One example would be when the existing orders are just so far out of whack with reality that you know that you’re not going to have much volume. For example, if there’s an item selling for 3 million ISK with a single buy order up for 50 ISK, I don’t think putting a buy order up for 50.01 is going to do anything. You have to put reasonable prices on your orders, or volume will suffer to some extent. Same thing goes with sell orders, people aren’t going to buy as much if they know they’re being ripped off with prices 500% higher than normal, duh.

However, in almost any other situation, it seems to me that smallish undercuts/overbids have exactly the same benefits (in terms of market dominance) for you as 0.01 ISK changes, except you have now slightly lowered the profit margin for everyone. Your 500 ISK undercut is just as easy to undercut as a 0.01 ISK undercut. Big slashes in the margin are much more likely to give you market dominance, but only because you’re now fighting for profit levels that aren’t worth it to the other traders.

In conclusion, 0.01 is your friend. To be successful at market PVP means making more money than other people, and you can do that through other means, not suicide bombing your own markets.

Trading update

The trading alt is still doing well, with existing orders and cash worth 420 million ISK now. Since he was created less than 30 days ago and started from scratch, I’d say it’s looking more and more clear that playing EVE for free is quite a likely possibility since with this increased capital I can make much more money per day. Given that his wallet was at 80 million on Thursday, this leads to a rough increase of 56.6 million ISK per day… Wow guess I can at least afford to lose a Drake every night. Once I can actually fly it, that is…

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One thought on “Some people are confused about Market PVP…

  1. […] Oh wait maybe they think they are engaging in “market PvP”… […]

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