Once again I will say that I hate undercuttings. I have tried a couple of things to counter this but to no avail. The are a couple of reason a free market doesn't work.
- You don't make wares to make a living. Lets say this were a game like sword art online where you literally live in the world. If you don't make enough money you will starve. Would you undercut? Yes, but not by such a huge amount that it wouldn't make a difference. After all, you need to earn something decent.
- There is no difference in quality. If I find a watch, and it would cost only 10 euro's, I doubt the quality of the watch. Perhaps I would buy it, just because it is only 10 euro's but I wouldn't really use it since I think it will break easily. Out here the only difference is HQ/NQ. Where NQ is still sufficient anyways for most of us. If someone has the same item for half the price. I would buy it since I cannot doubt the quality since it is just the same.
- No control on the market. IRL, in my country at least, you cannot drop prices below a certain margain, not only because the reasons above + it cost you something to buy it (or the materials) from elsewhere. But because the goverment well. governs it?
They make sure there is fair price region. Stunt once in a while, thats ok, but in the end if you have competition it again comes down to quality since you cannot drop the price too far below your competitor since it is not allowed.
These are just some problems we have with the market we have now. I am sure if I would drink my coffee and try to wake up I would come up with more... but not for now