Offer the best price and you have the best shot at a sale. The more you undercut, the more likely it is that your item will sell.
In high-volume markets where listing fees are low (e.g. glyphs, enchanting materials), it’s all fair game. The group isn’t really getting hurt by “sliver-undercutting,” i.e., undercutting by amounts as small as 1 copper…since so much undercutting goes on in these markets, sliver-undercutting preserves selling prices for whoever gets the sale (and high volumes will usually mean everyone gets a turn selling.). I do think sliver-undercutting on high-fee listings is counterproductive, though: If it costs 5g to list an item and someone undercuts you by a copper, you have to spend another 5g to undercut them, and so on. Pretty soon, profit is seriously hacked. Better that the first person undercutting offer a steeper discount on their item (say 5%-10% or more).
For me it’s a judgment call. If someone undercuts by a copper on a high-listing item, I will readily pay a copper more (or a gold, if it’s an expensive item) to buy from their competitor. At the margin, this sends the following feedback: undercut by a counterproductively small amount and you may lose the sale. If I’m the only buyer out there that day, the sliver-undercutter just lost their shot at a sale…