I only undercut if the price seems outrageous to me. I'm not a big market person and I don't do it often or anything, but when (for example) I check the board to find white coral going for 2k gil a PIECE, , that's overkill. It's true it's used in some mid-level recipes, but its also used by beginners who don't have a lot of money. I'll put it up for a more reasonable but still profitable price. I don't ever have enough to affect the market or anything, so one or two people will get fair deals and then the price will return to what other gatherers demand. I'm still low level so I can't really comment on high level prices, hence my example.
But I don't ever try to just make people mad or whatever, that just seems childish to me. And I'm not really smart enough to 'play the market' or whatever.