## Wednesday, April 17, 2013

### Standard Deviation, WoW Gold Making, and You!

NOTE: ONLY DOUBLE-DIGIT ADDITION IS INVOLVED IN THIS POST  :)

I’d like to start off the blog with a question many guildies have asked me. On TheUndermine Journal, you may have noticed Standard Deviation listed. Sooooo, what does that mean? I won’t teach you the math, but I will show you how you can use Standard Deviation to save time, money, and prevent noob mistakes. What is it though? As Wikipedia says “For a finite population with equal probabilities at all points, we have:"

Yah, thanks for simplifying for us there, buddy. Big help.

Sure some of us might remember something vaguely from highschool “blah blah square root…blah blah sum of squares.” Don’t worry about it. A big standard deviation means prices are all over the place (think pet or transmog markets), whereas a small standard deviation means everyone agrees where prices should be (ore, herbs, fish). You don’t have to do statistics though to use standard deviation! Nonetheless, memorizing three numbers will earn you a lot of gold that you’ve been giving away: 68, 95, and 99.7 (or if you don't care about rounding, 70%, 95%, and 100%).

SCARY GRAPHS!

Let’s explain, by using an example. You ran a few dungeons and have a few stacks of Windwool Cloth that you want out of your bags. You don’t necessarily care what price it sells at, but you still want the most you could get, otherwise, you would just vendor them. Well, how much would it sell at without having to repost? Turns out, Standard Deviation gives you that answer. The Undermine Journal says that the mean price for Cloth on my server is 2g 20s (the “mean” is the average), and that standard deviation is 50s.  Well, here’s where the three numbers from earlier and the ugly graph above come into play. The big middle part makes up about 70% of the graph, and the range of that middle part is the mean plus/minus one standard deviation. In short, 70 percent of the windwool prices will be between 2g20s - 50s = 1g 70s, and 2g20s + 50s = 2g70s (Statistics majors, just shhhh, I know). In other words, you can reasonably expect to be the cheapest at some point soon, if you post in that range. If you for sure want to sell, post on the lower end. If you don’t mind reposting once, post on the higher end. Since you aren’t in a bind, in this example, you just throw it up for 2g 70s and call it a day. Viola! It sells (cause it will) and you make an extra 20-30 gold over what you would have if you just undercut the 2g 20s current market price. Personally, for cheap items, I don’t worry too much about this, but if you were selling an expensive crafted item like a 496 chest piece, you might want to consider the higher end of the spectrum, since someone who is willing to pay 20k will probably also be willing to pay 23k, and capturing that extra 3,000 gold is just smart posting on your part.

So, you’re saving you time and money from posting within +/- 1 standard deviation. Great! Now, what about preventing noob mistakes? If you had a battle pet listed for 99g, and someone whispered you offering 97g, you’d accept the offer, right? Why? Because 2% doesn’t really matter. People lose a lot of money to 2% though through excessive undercutting.

For this example let’s say you’re a strength user and got some Flasks of the Warm Sun in LFR bags. You need gold fast because you wiped 30 times and don’t have the gold to repair your armor. On my server, these flasks sell for a mean(average) 80g, with a standard deviation of 10g.  Look at the graph above again. The middle part +/-oneSD was 70%. Well, the larger section is +/- twoSD and is 95% of the total, and the largest section is +/-3 SD and is 99.7%. Without going too mathy on you, that means that if you undercut by two SDs, you’ll have almost 100% of the future flasks be more expensive. This means it’ll sell fast; your flasks are the cheapest people will see for a while.

My assumptions in this post make statistics majors angry. Ignore them.

The thing is though, the chance of it selling are practically the same chance as if you undercutted by more, and yet people undercut for less than 2SDs all the time! Don’t do that! If you just need gold right now, and need something to sell immediately, what this shows is that you never want to undercut by more than two standard deviations, because it will be just as good of a deal for buyers as a bargain basement price where you drop your pants and give away all your profit. Specifically, in the Warm Sun Example selling the Flasks at 70g might take a bit, but 60g would sell just as quickly as 50g.

Takeaways:

2. Try to post between the mean +/- 1 std dev.
3. For items you don't mind reposting, post at mean+1std dev
4. Never post for less than mean-2 std dev.

Thanks so much for reading my first real post, I had a blast putting it together, and I look forward to writing more for y’all.

As a bonus, for anyone who retweets this, I’ll show you one-on-one how to automate all this standard deviationing so you don’t have to do the math for every item you try and sell. And remember, while this helps, all you really have to do to make gold is

Search. Craft. Post. Every Day.

#### 1 comment:

1. great deal of work and well put together