1.6 Leaked Patch Notes

[lemekim]

that doesn't explain why TB or stormwind don't have AHs... people seem to complain about lag in ironforge enough to warrant it... it probably doesn't matter as much for SW, but if TB had an AH, it would have been nice...
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Actually that's how it was in Beta. All 3 major cities for each side had an Auction House. But that system had a major flaw. With 3 Auction Houses available, there is no easy way to check all 3 at the same time, thus people would usually check the one that is easiest to get to and one that is used as their Hearthstone location. While initially the difference between various cities might not be large, the sellers will usually want to place their good at the Auction House that gets the most views. Thus this auction house now had more items than others, which attracted more buyers because of wider selection and more sellers because of higher number of buyers. This continued, until one Auction House dominated others, and the other 2 pretty much were empty. Because they were pretty much unused, the rest of the Auction Houses got removed.

Well, actually the remaining Auction Houses were also moved (Undercity and Stormwind were both most popular Auction Houses because of their locations) to the now known locations in Ironforge and Orgrimmar, in effort to reduce lag. Of course, since most of the lag actually came from tremendous amount of people and not location, the lag moved to new locations as well.