What does "lower item cost " in magic item creation cost mean?

In Creating Magic Items in the table "Estimating Magic Item Gold Piece Values" under "Base Price Adjustments" it says for multiple different abilites that the price adjustment is to "multiply the lower item cost" by 1.5.

What is meant by the "lower item cost" ? Is it the item that costs less? Or the lower caster level? Or the lower spell level?

As an example, a player of mine wishes to improve a rod with a use activated shield effect (cl 1) which cost him 2'000 gold pieces with a dispel magic effect (cl 10). My questions are these:

• Which is the lower cost that has to be multiplied by 1.5?
• Assuming that the lower cost is that of the shield effect and as magic items have only one caster level, the caster level for the shield effect would also increase. Am I correct to assume that it would increase by 18'000 gold pieces?
• There are two questions here: one about computing the cost, one about computing the caster level; the second seems a necessary preliminary for the first, maybe it is worth asking separately? Oct 21 '18 at 10:40

While the Table Table 7–33: Estimating Magic Item Gold Piece Values (Dungeon Master's Guide 255) probably could be clearer, the Magic Item Compendium really is. In the Compendium on Creating Magic Items, in part, says

In most cases… the cost of adding any additional ability to that item is 1-1/2 times the value of the added power (or the value of the added power plus 1/2 the value of the existing item, if the added power normally costs more than the existing item). (233)

So when the Dungeon Master's Guide says cost it means the power's computed value rather than, for instance, caster level or spell level.

That said, no magic item that I'm aware of has, by default, different caster levels for its different effects (e.g. there's no published magic item like a rod of shield and dispel magic that can generate a shield effect at caster level 1 then also generate a dispel magic effect at caster level 10). However, as both the Dungeon Master's Guide and—more explicitly—the Magic Item Compendium allow combining existing items with no caster level adjustments up or down for the added items, adjudicating combination items already shouldn't be that big of a deal. (For example, a magic item can totally have multiple magic auras if scanned with a detect magic spell, and this GM uses the highest caster level to determine if a magic item is temporarily rendered nonmagical by a dispel magic spell.)

That is, if the DM who is using the Variant: New Magic Items (DMG 214) allows a magic item creator to research then create a new magic item that's a low-value rod of shield that has a caster level 1 then research and create a new magic item that's a higher-value rod of dispel magic that has a caster level of 10, the creator may then want to add the ability of one of those magic items to the other. To compute that items's total value, take the value of the item with the lower value, multiply that by 1.5, and add that result to the other item.

Note: This DM suggests actually using those Variant: New Magic Items rules—that make creating new magic items as difficult as Researching Original Spells (see this question and DMG 198)—or a similar method rather than allowing PC item creators to create on a whim any ol' magic item they can think of using 7–33: Estimating Magic Item Gold Piece Values. This very site and online forums agree that player-created new magic items using in isolation only the table can be incredibly disruptive, and, instead, all new magic items should have their prices set by the DM after the DM's compared the new magic items' prices to similar existing magic items' prices, with the DM using the table only as a last resort.

• Thanks, I'll look more into creating original spells. As for the moment, do I understand you correctly that when you combine the two mentioned items with different caster levels, that you would still cast the shield spell at CL 1 and dispel magic at CL 10?
– TheQ
Oct 21 '18 at 15:50
• @TheQ By my estimation—and I know it's weird—, yes, the shield would be at caster level 1, and the dispel magic would be at caster level 10. That's because the creator isn't just "adding a new ability" to the existing magic item but, instead, more like cramming a brand new magic item into the old magic item. That is, in the same way combining, like, acrobat boots and boots of the battle charger into acrobat boots of the battle charger wouldn't see adjustments made to the caster levels of either item, neither do these two items in your question see their caster levels adjusted. Oct 21 '18 at 16:04
• @TheQ I feel the need to mention—as I have in Hey I Can Chan’s answer to another of your questions—that using the spell research rules is not necessary, most of the time, for “custom” magic items, and personally I find the suggestion to use them as a matter of course to be a poor one. This answer is completely correct as far as actually answering the question, and the points on the problems of blindly using the magic item price guidelines are valid, but the spell research rules are not necessary here to avoid those problems, and in my mind cause more problems than they are worth. Oct 21 '18 at 17:42