I undercut by 1 copper, not to piss people off but I always tell people who want to make gold on the AH when you undercut someone on something think of it as undercutting yourself.
Without undercutting people would sell at any price they want the must get stuff.
But it sometimes lowers benefits of using AH somewhat.
It is a two-sided dagger.
If I ever notice someone that is camping the AH while I'm putting auctions up, especially for gems, I'll take 5 minutes out of my time to try to get him to waste as much on auction fees as possible. I'll put one gem up, wait a few seconds until the person has put another handful of those gems under my price, cancel my auction, and put another one up. Rinse and repeat, and after about 5 minutes they usually stop posting them or I've cost them a good 50-100g on wasted auction fees. Not a whole lot, but it's my little battle against AH campers.