Friday, April 19, 2013

Market Manipulation: Drunken Mogul Style

Today's post is a guest post written by GoblinRaset the author of the WoW gold making blog The Drunken Mogul.  Be sure to check out his blog when you're done reading his post, there's more great information where this came from!

Today we are going to discuss how to manipulate some markets, via creating a floor for mat prices and creating a ceiling for the crafted items. Also, quick warning this post will involve some maths, so stick with me and hopefully it will all make sense. Now, on with the maths.

Creating mat price floor:

First, before we can create a floor price for mats, we must determine our price ceiling for mats. Meaning, we figure out, 'What is the maximum price I am happy/willing to pay for a given mat?'. In order to do this we must consult some resources and use our own personal knowledge of the markets to find this magic number. For doing this I like to use and, for getting a general sense of how these items are/have been priced for not just my server but for the region/faction.

*For the purposes of this discussion we will be using LW profession as an example due to it's simplistic material needs/structure, and will be using random numbers just to illustrate points.*

Let's take Leatherworking first, so the basic mats for the top level LW are: Exotic Leather, Prismatic Scales, and Magnificent Hide. So, using the different resources available to us, let's value Exotic leather/Prismatic Scales at 5g/ea or 100g/stack, and this would make Magnificent Hides value at 250g (since it takes 50 Exotic Leather per 1 Magnificent Hide, 50x5=250). So, now that we have set our price ceiling, we need to make sure that our competition can not buy materials for this price or lower. We do this by setting up a dealfinding list in TSM, in combination with the app or using TUJ/WoWuction to notify us when they are priced accordingly, and setting the max price to the prices above. Then whenever the prices fall below or at the max price we set we buy them up as soon as possible. 

What this accomplishes is that our actual cost of materials (the average that we buy it at) is actually below our max price, and our competition's costs are all above our max price. Now while it may not be a big difference in costs, in the long run a difference of 50s-1g per leather when buying thousands of leather means the difference in thousands of gold. 

*Note; these tactics do not protect against dumb people, but as long as everything is setup correctly you should never lose money.*

Setting the ceiling for crafted items:

Now we need to setup how much we will charge for the items we are crafting. So, in regards to LW for the purposes of this discussion we are going to use the crafted dreadful set. For the crafted dreadful sets we basically have two groups of items that we can craft, those that require 1 Magnificent Hide(referred now to 1x), and those that require 2 (referred now as 2x). Since, our cost for Magnificent Hide is only 250g, we would want to set the threshold to something 25-50% higher, so somewhere between 300-375g (for 1x), and 650-750g (for 2x). but this is not our ceiling, this is just the least amount we are will to sell this item at, and the purpose of this discussion is to set a ceiling to help keep/maintain the prices of the items being posted. 

So, for figuring out where to set the ceiling, I like to set it somewhere between 100-500% of the crafting cost. Which, for the purposes of this discussion, would be 500-1500g (for 1x), and 1k-3k(for 2x). This works in such a way as that, when the crafted items drop in price to a price you are not willing to sell at, you post them at the fallback and allow the market to reset itself. Or, if the prices drop drastically you can use this information to make an informed decision about buying the item to flip (due to it being cheaper than mat costs), or just to help groom(as I like to call it)/maintain the market value of the items you are crafting.

Using this system will likely breed competition due to the fact that the markets for these items are now looking profitable, but hopefully with this system it will teach them the true value of the items and not have the mentality of "Hey I farmed these mats, so as long as I get something for these items I'm happy". And don't be afraid to apply this strategy to other markets.

In closing, I hope this system that I employ to great success works for you as well. Also, I would like to thank @PhatlewtsGold, for allowing me to do a guest post for his site, as he has been a great supporter of mine and my blog: The Drunken Mogul.

The Drunken Mogul

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