The "rate of drift" rule

“The velocity that prices needs to drift to meet each other is directly proportional to the speed at which sales are made."

I'm going to call it the “Rate of drift” rule.

Meaning the more often an item sells, the faster it's sell order price needs to drift down and it's buy order prices need to drift up.

Ok. Lets define some terms.

"drift" is the percent move per period. "Period" is how often you update the price, or the rate at which an automatic system does it for you.

"speed at which sales are made" is the volume of sales. If 10 items are sold in a day, on average, then sales are made every 2 hours, 24 minutes when looked at statistically.

The law, then, is that your sell price should drift downward at a rate that allows the statistical possibility of a buyer to present itself during a window where your item's price is the most favorable. Or, the buyer's proxy, the buy order, which is drifting up to meet you.

The “brute force” solution is to park your ass on the AH and relist your item 1 copper lower than any other seller that deigns to post a price under yours. Thus assuring that YOURS is “next to sell.”

But the reality is that the buyer is only available when they look at the market with the intent to buy. In this case, with 10 items sold a day, it's every 2 hours, 24 minutes on average. Obviously, that's something of a simplification. People buy less in the middle of the night, for example. But in general, the law is sound. After all, it's “In the middle of the night” somewhere and for someone all the time.

Markets, if left to do so, will seek equilibrium between the law of supply and the law of demand. The “Brute force” solution of 1 copper undercutting is only efficient in the eyes of the market if the price being undercut is too high to begin with. And by “efficient” I mean “Not wrecking the market.”

The way to prevent this, and move towards market equilibrium, is to know when sales are made and how much they were made for. With that information, you can intelligently calculate the optimal rate of drift. Without knowing how many sales were made, and how much they sold for, you are flying blind.

You might say “But Eve Online has that information! Why do people still sit there and undercut?” Because the prices have to drift towards themselves to meet and there is no mechanic to do that without manually resetting the price. When you rely on the players to do it, you get an asymmetric pattern with prices drifting down (undercutting) but rarely up. People putting in the buy orders are also the sellers, speculating on the item. An auto incrementing buy order lets them step back and let the market work just like the auto decrementing sell order. The pattern must be symmetric to have balance.