If they drop by thousands or perhaps hundreds all the better for the buyer, item will reach equilibrium sooner.

There are other ways to compete though then 1gil undercutting.

I will often buy stacks in the amount I need to hand in, or multiples of that number, for more gil per item then I'll pay for a larger stack. I am paying for not having to do the inventory shuffle. Then again I'll also buy that item for 1000 or some other interesting number, instead of the item listed for for 1 gil less...