There is a pattern in player driven economies, where the production (or crafting) costs and the selling prices of items converge to a point where the profit margin becomes minuscule or even negative. Examples which come to mind are World of Warcraft and Eve Online, but I am sure you may recognize this pattern in other games (primarily MMOs) as well.
A simple example:
Reagent costs for a health potion is 1.0 gold in total.
Crafting process requires only some seconds.
Putting an item into the auction house costs 0.1 gold.
The auction house price ranges around ~1.1 gold. Expected total profit is around ~0.0 gold. Player invested 200 gold in order to achieve the crafting skill needed to produce it.
In EVE Online players are forced to have high skill in production and marketing in order to have any profits at all. For newcomers it's near impossible to do any production related activity which is even remotely worth the time.
Why is this a problem?
It renders crafting to be more costly than beneficial in the very most cases. However, players should be incentivized to do crafting as some secondary activity, and not be financially punished for practicing it.
So a solution which comes to my mind is to create a better crafting system (but how?). However the fundamental issue might be the natural effects of market economies. It is not unfamiliar to the real economy to follow the same pattern. It's a price mechanism to prevent over-saturation and challenge business sustainability: If your product costs more than its production, that business is not sustainable; and if there is too much competition, you have to set your prices too low in order to keep up.
Let's stick to WoW and EVE Online as basic reference examples.
The questions are:
- Is this an issue at all which deserves to be fixed? Can it be fixed at all on a large scale?
- How can you fix it, or at least reduce that price pattern from occurring that much?
- Is there a way to have that solution remain being free market based and player driven?