Quote Originally Posted by Wazabi View Post
I agree with Ziz that demand is different at different price. As long as demand has a high elasticity to price, there will generally be a higher demand at lower price. Interpreting it at an interval is not very realistic and misleading.
On the freedom to adjust price though, I will have to go with you. You're right that the freedom to adjust price will lead to this 1 gil undercutting which makes the journey to equilibrium slower because the incentives are not there to adjust further down. With restrictions such as tax to adjustments, there is an incentive to post at a lower price that will have a higher probability to sell since you no longer have the freedom to readjust the price freely.

However, this also depends on the size and activity of the market. Given sufficient market participants, prices will hit equilibrium quicker with or without freedom to adjust price. At a large market like this, restricting freedom to adjust price decreases the market efficiency because it introduces another economic phenomena called sticky price. That means that when the equilibrium shifts, it will take longer for the price to adjust to reflect that because there is now a cost associated with price adjustment.

So, I believe your idea would work only in a small market...but not advisable for a large market.
The price elasticity of demand does not need to be constant, and it does need need to be large on every price interval. That elasticity can theoretically be close to 0 in certain intervals, and the effects of the 1-gil undercutting in such situations is what is being analyzed in the first post of this thread. In which situations can we expect the elasticity to be small? Well, in cases where there are no good substitutes and the necessity is high; such as when a person just hit lv50 in a new crafting class/gathering class and he wants HQ gear for said class.

As for whether or not the market is big enough: assume there are 50 sellers on a market, all of them 1-gil undercutting, while the price is 10k gil above the equilibrium price. Assume that each of the 50 sellers does ten adjustments per day, then it will take at least 10000/(50*10) = 20 days before the equilibrium price is met. Perhaps the markets are not big enough in this game? Now if we had 500 sellers on a market, it would take at least 2 days, and that's a far more reasonable speed. Which do you think reflects FFXIV better? From my experience, the former reflects better.