The only way for an NPC to "compete" with a player is to undercut them, which is, in essence, regulating the economy through prices defined by the "governing authority" (ie. SE) whether it's on a moving scale or not.
And? Nothings wrong with that. The NPC prices would vary based on what the players have been selling them, some days (in game days, if they bring that back) they'll be higher, and other days they'll be lower, their supply will also be limited. They'll be just like players other than they don't have to farm the items, and their sale prices will be randomly generated, within a rang(15% maybe) based on player prices for the previous day.
This will enforce competition(we call that capitalism, not communism), and even if some players get together and monopolize an item, they'll have competition regardless.
Rare items would be just that, rare, with a low chance of certain ones of them ending up at respective NPCs(Leaping boots at a tanner, armor at a blacksmith). Not all of them though, and maybe only 1 item a week would appear across the entire world.
Another thing is that players would have to actively check each NPC to see if they're undercutting anything on the AH(or whatever they use).
Something variable like this has NEVER been used. If FFXI had this, then Silk Thread prices wouldn't have dropped like like anvils once SE had NPCs start selling them (which totally sucked, they weren't worth farming afterward).
I can't believe I agree with you on something(the drop rates totally sucked, my buddy was 0/72 on leaping boots and 0/50 on the emperors hairpin).