What is an item worth?

[Zigkid3]

I was going to say this post is Zigkid3 and Bizzybeast/MentalPoison bait, but Zigkid3 beat me here.

I am a snake in the grass! (you also forgot Wazabi)

Anyone who thinks that there is no problem with the current level of undercutting and degree to which things gets devalued must also feel that Walmart is good for a local economy.

The item(s) are that are being undercut are being devalue from being overvalued.
And yes Walmart is. A lot of people may dislike Walmart from an ethical stand point maybe, but I don't see how someone could argue that whole selling a variety of products under one roof at a cheap cost for cheap prices for buyers is bad for the economy.

When someone doesn't care that they are selling at a loss and undercuts an item for a third the cost of its base materials (you see this with lumber frequently), it drives out other producers.

Yes, that is the point. If a certain market/industry is profitable, in a free market people will enter that market for a slice of the market share. People will continue to enter that market until profits reach 0. At the point where profits are 0, this is where suppliers are matching demand. If profits for a certain market are below 0, then people will exit the market because there are too many unneeded suppliers.

But in what business model does selling something that costs 300+300+300+50 for 300g -tax make sense?

Depends, do you know exactly how that other person got it? they might've gotten it for cheaper some how for all you know.
If they did get it for 950g total whether through crafting or buying it, normally people will sell it at 950g or more obviously.
In some cases however, if the item just isn't selling in the first place then they'll have to put it for a cheaper price because it was overvalued. Yes it is a loss to them, but at least they are minimizing their losses instead of having 950g be gone forever. So usually it's to minimizes losses on something they can't otherwise sell for whatever reason. In other cases someone might have a monopoly on a certain product thus far but a new person attempts to enter the market. The monopoly owner sees this and will price things at a loss to themselves on purpose in order to drive out their competition, this is called predatory pricing, then after the potential competitor has left they'll go back to continue selling at their normal price again which while might be a loss in the short run it'll be better for the long run. Luckily though in a game like FF14 its hard to monopolize on anything, though it might happen from time to time.

"An item is worth what somebody is willing to pay for it."
I wish this phrase were the truth in FFXIV, but the truth is:
"An item is worth as little as someone would take to liquidate it for, at this exact moment"

An item is worth both of those statements. If you can't compete with the person willing to sell it for less than you then that's your fault.