This has been an issue that has been driving me up the wall.

I have never complained about undercutting. It's a natural, and healthy, part of economics. It's going to happen. It needs to happen. What DOESN'T need to happen is the massive amounts by which people undercut. All it is doing is killing the market for that particular item. I wish I could strangle people and make them understand this point:

Undercutting by 39587342589327459832475293485729345872395873425897k, doesn't create demand. It doesn't magically make people stop, run to a market board, and desperately seek out that one item that they suddenly feel the need to buy right now. It doesn't make your items sell any faster than if you had undercut by 1gil. You're still on top of the list, one way or another.

Sure, it might be seen as rude to undercut the guy below you, but it doesn't make it any less rude to drive the prices down even further. You're still undercutting him. But now, to pour salt into the wound, you're killing the market on top of your undercuts!