Fair value: how it is computed and why

The fair-price model (VWAP over history) and the deviation from it. What fair value is and why it moves on its own, when “cheap” is a mean-reversion signal and when it’s a trap, and how to read “vs fair” together with liquidity. With a worked deviation example.

What is fair value and how is it computed?

Fair value is the VWAP over history: the volume-weighted average price across the period. High-volume days weigh more than random spikes, so it’s a stable anchor for the “normal” price rather than a snapshot of the order book that twitches every minute.

It takes the regional trade history from ESI over a period of up to 90 days, not the order-book price right now. So fair value ignores a single “fat” order or a momentary panic and shows what the item costs on average when people actually trade it. It’s the baseline you measure today’s “dear/cheap” against.

What does the “vs fair” column show?

“vs fair” shows how far the current price has deviated from the model. A value ≤ 0 means the price is below fair (potentially cheap), > 0 means above. It’s a handy filter: sorting by it quickly surfaces items trading below their usual level.

But “cheap” is only a signal in context. Sometimes the price dropped for a reason: oversupply after mass production, an item nerf in a patch, a structural shift in demand. Then it’ll stay there, and fair value itself will drift down to follow the market over time.

When is “cheap” a trap?

Three classic false-cheap cases: a one-off print on a single trade (especially in illiquid items), a slow settle after a patch (the item is no longer needed in the old volume) and a seasonal demand dip. In all three the downward deviation won’t snap back to the old norm — you buy “cheap” and get stuck.

The mirror case is a price above fair (vs fair > 0). Sometimes it’s just overheating that will roll back, and the item is better to sell. But the rise can be justified too: a new meta fit, a ship pushed into the patch meta, an event kicking off — then “dear” stays dear and fair value pulls upward to follow the market. So the sign of the deviation is a cue to work out why the price is there before you decide.

How do you use “vs fair” properly?

Never on its own. Combine “vs fair” with liquidity (turnover, volume) and risk (volatility, spread persistence). Cheap + liquid + calm is a good mean-reversion candidate; cheap + illiquid + jumpy is usually a trap.

The item card makes this visual: the price chart with its history shows whether the price has been here before and how fast it bounced, and the “Signals” panel next to it gives turnover, volatility and persistence at a glance. Decide on the whole picture, not one green number.

Example: how to read a deviation

Say a module has a fair value of 5.0M and the best sell right now is 4.4M — a vs-fair deviation of −12%. On its own that reads as “cheap.” Now check the context on the card: turnover steady over recent weeks, low volatility, a persistent spread, and on the chart the price has dipped to this level before and bounced. The picture adds up to a mean-reversion candidate: buy near 4.4M, sell closer to 5.0M if liquidity lets you exit.

Now take the same −12%, but turnover has collapsed over two weeks, the chart shows a single step down with no bounces, and the patch notes nerfed the item. This isn’t mean reversion: demand has left and fair value simply hasn’t slid down after the price yet. The same −12% means the opposite — the context is what tells them apart; the deviation number alone says nothing.

Why fair value moves on its own

Fair value isn’t nailed down — it’s a rolling volume-weighted average, and it follows the market with a lag. If the price has genuinely dropped and holds, the model pulls down to it over a few days and the deviation collapses on its own. So vs fair is a short-window signal — “below usual right now,” not a permanent “this should cost X.” The longer an item sits “cheap,” the higher the odds it’s the new normal rather than a discount.

Where fair value works for you

In Mercator the model isn’t dead weight. The “vs fair” column on Market and its filter quickly lift items trading below normal; the item card’s chart with the fair-value line shows the history of deviations visually; and in the “What to buy” scoring, the deviation from fair value is one of the factors that moves a position up or down in the shortlist. So fair value turns from an abstraction into a filter and part of how a trade is scored.