After a little bit of playing the gem market in Pandaria, I have once again come to the conclusion that some people do not understand economics. I don’t mean this in the college Econ 101 aggregate demand/supply curve type of way. I mean this in the “don’t trade a quarter for two dimes” kind of way.
I got on this line of thinking when the price of ghost iron ore started dropping precipitously. To give you an idea of what’s troubling about it, let’s consider the results of prospecting a hundred stacks of ghost iron ore. My experience has been, and Wowhead’s prospecting table seems to back this up, is that you get the following distribution of gems per 100 stacks of ore:
- 600 uncommon gems of varied color (generally evenly distributed);
- 100 rare gems of varied color (generally evenly distributed);
- 500 Sparkling Shards, which can be turned in to 50 serpent’s eyes.
Thus, on average, for any given stack of ore you will get 6 uncommon gems, 1 rare gem, and 5 Sparkling Shards (or, if you prefer, half a Serpent’s Eye). For any given stack it can vary quite a bit, but the more you prospect the more it will center on this average. I’ve prospected probably three to four thousand stacks of ghost iron ore, and if these numbers are off, they are not off by much.
The question for me was what the basic value for a stack of ore should be. The uncommon gems vendor for 60s each. The serpent’s eyes vendor for 50s each. The rare gems vendor for 3g50 each. Add those up and you get a stack of ore, on average, providing 7g35 worth of gems at vendor prices.
Of course, no one would simply vendor the results from a stack of ore prospected, but I’m doing this to establish what I think is a sort of baseline vendor prospecting value for ghost iron ore.
But that’s not an accurate baseline, because if you’re prospecting ore you’re also a jewelcrafter who can enhance the value of these gems. 6 uncommon gems plus two jeweler’s settings (purchased at 1g35 per from a JC supplier) can make an Ornate Band and a Shadowfire Necklace, either of which can be vendored for 8g97 each. (Yes, this requires the right mix of colors, but with enough ore you will get close enough to it). A rare gem can be cut to increase its vendor value from 3g50 to 4g. And a serpent’s eye can be cut to increase its vendor value from 50s to 1g18. Thus, from one stack of ghost iron ore, you can expect, on average, to be able to create the following vendor value:
- (8g97 - 1g35) x 2 + 4g + 1g18 / 2
- (7g62) x 2 + 4g + 59s
- 15g24 + 4g59
(Note: this actually undervalues it by about 40s because the Ornate Bands and Shadowfire Necklaces created are sometimes 415 blues instead of 384 greens, and these blues have a higher vendor value. But we’ll ignore that for now).
Now, if you’re buying ghost iron ore like me, you’re not going to vendor everything. Specifically, I prospect the ore to get at the rare gems, and I don’t really consider the uncommon gems and serpent’s eyes to have much value beyond the vendor. So really, I consider the ghost iron ore to be equal to 15g83 plus one rare gem. The reason I do this is because on average I find a rare gem to be far more valuable than its 4g vendor price, whereas the other gems aren’t much more valuable than that.
I got to thinking these things because the price of ghost iron ore of late is very close to its prospected vendor value. I have trouble accepting this to be so, because my impression is that there are quite a few people out there who have much larger jewelcrafting aspirations than my own, and I figure that, like me, they buy ore when it gets to a low enough price. The price at which I buy ore has dropped from 80g toward the beginning of the expansion to 50g until a few weeks ago to 20g now.
Ghost iron ore is now occasionally available, in quantities of 50 stacks or more, for under 20g a stack. I find this amazing. I look at 20g a stack ghost iron ore and consider it to be like a vendor item, selling for 4g17, that will net me one rare gem of a random color. These are gems that can sell for 50g, 100g or even 300g at times. I’d jump at that as often as I could.
I just don’t know how ghost iron ore can get that low. It’s perplexing.
But that’s not the biggest perplexing thing about the gem market. The real perplexing thing has to do with the listing prices of some gems.
The most shining example of economic failure is the Subtle Sun’s Radiance. This is your yellow +dodge gem, a gem that Icy Veins recommends to absolutely no one. Its market is limited to people who don’t know what they’re doing, or people who do know what they’re doing and have a peculiarized stat mixture that leads to dodge being more effective than parry, mastery, stamina, or other tanking stats. Naturally it is not a gem that sells well.
Despite this, there are 24 such gems listed on the auction house right now. Four are listed by someone whose name begins with M for the low low price of 4g07s99. Eight are listed by someone whose name begins with K for the ever so slightly less low price of 4g08.
The thing that perplexes me about this is that each gem costs 60s to list for 12 hours. If the gem is sold you get that back, but if not you’re out 60s. This is for a gem that in my experience has never sold at any price other than the 4g you get from the vendor.
When you put a gem up for auction and pay a deposit, at the very minimum you are making a bet that it will sell for a price that justifies the risk. But here you have K, whose eight gems he could have vendored for 32g each, instead cost him at least 4g80 (assuming he did a 12 hour auctions), all risked for the potential reward of getting back 64s more than vendor value. In what world does this possibly make sense? It’s worse: the “bid” price for these auctions is below the 4g vendor price. In theory I could make money by bidding on these gems and delivering them to the vendor!
That’s not an infrequent occurrence with that gem, even on buyout. I once bought out an auction for 3g, just because I could. It’s not a way to make very much money, but it does illustrate the basic failure of some people to grasp vendor value.
In my mind, when a gem drops below 20g in list price that’s a pretty good sign that someone’s overselling it, or no one’s buying it. In either case, my judgment is that it’s not worth the listing fee to put the gem up there. Sometimes I save the gem on the hope that the market recovers. Sometimes I vendor it. I would never cut a new one, and in fact I rarely cut a gem that has a current auction price of under 35 to 40 gold.
A lot of people apparently do not have that line. There doesn’t seem to be a line below which someone won’t cut a number of gems and list them to undercut that price. This perplexes me.