http://tobolds.blogspot.com/2007/04/general-economic-equilibrium-in-world.html

Although the market of each server in World of Warcraft is very large, the market is simplified by allowing direct exchange between players in an auction house. The auction house is a place where players can put items they don’t want up for sale, with a starting bid and buyout price, for other players to search through and purchase. This article discusses the effect of gold farmers on the prices of items. Gold farmers are typically people who’s job is to hang around in a certain spot, collect one specific thing, sell that item on the auction house and sell the Warcraft gold they make to players for real life money. Players in general tend to use these gold farmers as scapegoats for any drastic increase in the price of a certain item, but this article seeks to clarify that this is not only untrue, but that the effect of gold farmers is actually lower prices.

Previously in class we have discussed market exchange theory. Although the auction house is technically an auction, the buyout price is almost always the selling price of an item. This allows us to model each item being sold as a seller with the seller’s valuation being the buyout price. There are no traders, and the buyers are the players who wish to purchase the item. Because of their hording nature, gold farmers will typically have more of a certain item than normal players. This will lower the gold seller’s valuation of each item relative to the average player. When this gold seller goes to put their items on the auction house, there is effectively several additional sellers added to the market with a lower item valuation. As we can see by working out this simulation on paper, this will result in a lower selling price assuming the number of buyers is less than the number of sellers. The buyers end up better off, and the sellers end up worse off. What we can see from this is that if there are gold sellers flooding the market with cheaper versions of the items you are trying to sell, the best way for you to make money is to find a market with less sellers, or at least where the sellers do not outnumber the buyers.