Sometimes it's simply because you could wait 10 days to sell 1 item for 5M or you could sell 10 of them for 800k in that same time frame. And you will probably notice, lots of people like to keep even numbers... So they will cut down by a even based number. Yes, you could cut something at 1M for 999,999. But usually, you'll see the next price at 990,000. Why cut that much? Because it's simple and it's still high. Not everyone is looking to maximize their profit, some are just looking to get quick money (and some are simply being smart about speeding up the buying process. Lower prices means faster selling usually and if they have excess...).

Sure, you may not want to reward under-cutters by buying it out and reselling, but if you choose to do that, you also must take into consideration that if more start selling that item, they often price at the lowest current price (which means it will continue to be undercut until someone man's up and buys).