How come people value TF2/Dota 2 keys at 1.5 dollar and less when trading?

Lots of people don't care about legally, there is nothing stopping them.

Keys are $2.15 on the market which means the seller receives $1.88, the rest is collected by Steam.

Rather than doing that and having the funds locked to your Steam Wallet, some people choose to sell them for PayPal at a discounted rate due to the hassle involved. I haven't checked in a while, but the discounted rate was around $1.50 so I'd assume that's where the value comes from.

Some keys are bought with stolen CC, and sold with a cheaper price.
And if the keys were the same price as the store, no one would buy keys from traders, which imply risks if you buy them with Paypal.

You can have keys legally from other ppl. So keys worth what you and the other person agree on.

Valve thinks keys worth 2.5$ , but a lot of steam users that trade keys think they worth around 1.8$ so they trade them for 1.8$(against TOS i think) or the equivalent of 1.8$(not against TOS if can be placed in steam trade window).

Price transfer - that's the term you will ever need to know.
Most of the game in Russia,CIS (East Europe) mostly price at 50-75% compare to USA/EU/the rest of the world. It has been long since from TF2. For Example, CS:GO is priced at 15 USD in USA but only 10 USD value in Russia. This slowly shift the selling power over Russians. (Notice that how 2 USD = 75% of 2.5 USD.)

Assume that you are Russia, and keys are sold at 2 USD, the game is CS:GO

• In Foreign Market you gain great profit selling at same price (or little less) compare to others. The fact that not all Russians have good English --> not much sellers can do this. --> Selling game at 5->7 Treasure keys and so on.
• In your own market, you have to reduce price close to your buying price, even gaining profit only at 10 cents, people still buy and sell like this. --> Selling game at 5 keys.

More over, with steam sale off, people usually stocks more than usual gifts to sell later on normal day. Now this is their selling behavior

• Sell all your gifts at sale off event. Thus gain minimal, safe profit. Now if a key is priced at 2 USD. A game sale off priced at 7 USD --> 4 keys payment --> 1 USD profit. Since not many sellers can make a reduced price in that 1 USD value --> they gain good profit.

• Waits for sale off to end and sell. --> Gain higher profit, risky trade, opportunity cost. But the problem is, even after sale off after 1 to 4 weeks, price is just slightly higher than sale off time --> They still gain significant profit. However, not all traders act the same, some only care for 1 USD profit each.
  (The story is, one of my Belarus friend who is an active game seller via treasure key actually make profit at around 150-200 USD after 1 month of every CS:GO sale off. He sold at 3 treasure-->5 treasure keys, Lowest possible price. And he sold like hundreds of gifts in order to make such profit. You might think that is a good deal, but in term of opportunity cost, I can send all those money to buy games into a bank and earn interest. I might not have made 200 USD in one month but it is safe, free risk, not wasting any time.)

----> All of that two effects above --> boosting the supply of treasure keys on market.
Now assume that you tired of these selling or want to cash out, you have to sell at much lower price since there are so much sellers. To make yours goods caught attention, you price have to be low. Hence, you willing to sell at 1,7 --> 2 USD as long as you still make profit.

Now that because of sale off game sell and various factors, you still actually make some profit even at 1,7 USD
==> Hence key that priced at 1,7 USD usually sold at large quantity (because those sell at those price usually about to quit trading for a while).

Also, you have account for certain promotion item that force down the price of keys. Let's say that in Dota 2 they selling headphone at 80 USD, comes together with Battle Furry equipment. This promotion only available in EU and North America. As a result, people that want to have battlefurry, usually have to pay at price around 35-> 40 Treasure key (exactly higher than price of the headphone but since I cant buy the headphone, i have to pay such price) This also push up the treasure keys supply and make them relatively hard to sell.
The Headphone tricks usually grant you free headphone (even at this time today, you can still sell BattleFurry at 35 keys = 70 USD, it is like you buy headphone at 10 USD). As long as there are people still doing this, it will boosts up supply of keys in market ---> lower price.

Lower price come with risk. 2.5 USD is free risk price.
2.2 would be steam market price.
2.0 would be black market price at North America/EU.
1.7 USd would be at other market.

Now that the demand for keys are much higher in NA/EU, hence key priced at 1.7USD is not a threatening force since they available in low quantity. 1.7 USD is the acceptable price in SEA, China. There are many sellers buying at this price to later sell on other market at 2 USD or more. With this process, price in SEA will rise while EU/NA will reduce.

It is hard to explain economics concept in here. If you have BA background, you will get 90% of what am I saying.

u are getting ripped off? then dont buy/sell them... problem solved! xDD