Friday, April 25, 2008

Auc Advanced: Pitfalls

Using Auctioneer is not as simple as it may seem. Great caution must be taken in examining the prices of items. More caution must be taken the greater the rarity of the item. This is because Auctioneer Advanced (AA) lists most of its valuations based on the listed buyout prices. These are not the actual prices the item sold for, but the listing prices. This choice of pricing metric can lead to very misleading information.

Example 1: Insufficient Data- I recently had the Enchant Chest +12 Resilience plan drop. This is a rare world drop. My AA listing for this thing is 2000g. Rare world drop= 2000g, seems almost reasonable. This was based off of 1 data point. I /2'd this item for mnay days, and eventually sold it for 350g, which I believe is a more reasonable price. The AA valuation is clearly false, given the 1 data point of the listed price (not a purchased price).

Example 2: Manipulated Data- The other end of the rarity spectrum would be an item such as Felweed or Small Glimmering Shards. Very common items for which many sales occur on the AH every day. However, daily changes in the market can make the AA valuation very inaccurate. For example, my current AA tooltip for Small Glimmering Shards looks like this:

While AA tells me the worth of Small Glim Shards is 20g, I know that it is impossible. Here, you can clearly see that two players have either intentionally manipulated the market or having some fun. One could set these ridiculously high prices in order to pull most people using AA or other auction addon above the market value that the seller has set, allowing them to control the market (at least vs those mindlessly using AA appraisor pricing).

Here we also see an example of the Std Dev valuation model failing miserably. Standard deviations are sensitive to outliers, and in this case you can clearly see the effect. I would love to see an AH addon that uses a 5-number summary, which is very resistant to outlying values.

Example 3: The Market is what it is. No matter how much AA states as the mean listed buyout value, you should not sell your item if your preferred price is underbid by many others. For example, if the absolute minimum I will accept for Terocones x20 is 15g, and there are 3 other auctions below 15g, I will list only if I think the likelihood of more auctions being created below 15g is low AND the likelihood of my auction being the lowest buyout in the next 24 hours is high. I know that the market for Terocones is fairly high-volume on any given day. Therefore, I will list now, expecting that the 3 low auctions will disappear, leaving my auction the highest. If there were 20 auctions, I would not bother to list my auction, as it is unlikely that all 20 auctions below my price point would be bought and it is likely that in the time it takes to sell those 20 auctions, that someone with a lower price point will come along and underbid or match the auctions below my price point. All scenarios which would lead to wasted money listing the auction.

Lastly, luck can play a role.....