I undercut by one copper piece because it is the most intelligent thing to do.
As a seller, I want to be the first name the buyer looks at, and I want to do that by losing as little capital as possible (in the case of a purchase).
If SOE designed it so that in order to appear before the next seller, you had to undercut by a margin of no less than 10%, then I would list all my items at prices 10% lower than the next seller in line.
It essentially is costing me 1 cp. per item to advertise, and that's great marketing!
There is nothing rude about maximizing profit and the chances of making a sale. Don't want to hurt your feelings, but I don't know you. We are not friends.
Free Market Enterprise is your friend, however, if you know how to treat it right.