(know nothing of economics) what is the purpose of a Gold Sink?

[Deleted]

There are a lot of economically knowledgable people here so I wanted to ask;

1) What is the purpose of a Gold Sink?

2) If gold sinks were removed what impact would this have on the economy (both short and long term)?

Thanks

[Jotaux]

Gold sinks are there to remove gold from the economy. Long term you would see prices increase at a higher rate than without. Short term you probably wouldn't notice much.

[Cheze]

in WoW gold is continuously being added to the environment; quest rewards, drop sales, mission table, etc. Absent mechanisms to remove it from the economy gold would rapidly become less valuable (we would experience even more extreme inflation than we already do.)

Some inflation is good; we want some amount of inflation because it essentially functions as a tax on wealthier players, which helps keep tradeable goods affordable. In vanilla when there were many fewer source of gold and inflation was much less significant basic things like enchants were a much larger expense than they are today. The downside of inflation is that nobody enjoys feeling like their gold has decreased in value. 'Gold sinks' like repairs, flight paths, the AH cut, high dollar vendor mounts etc let blizzard remove gold from the economy in targeted ways, so that they can manage inflation in a way that players don't find frustrating or 'unfair.'

[mitbrandir]

Because Money X Velocity = Price X Trade. Generally speaking, trade the amount of transactions being made) and velocity are fairly consistent, so if the amount of money in the economy increases, an increase in prices follows. The gold sink is intended to reduce that the amount of gold

[LilSaihah]

Player action creates gold.

Something has to destroy that gold or the economy inflates uncontrollably. Goldsinks destroy gold.

[Youn]

In a game economy it isn't a closed system. This causes a problem similar to the real world if there was no regulation on the printing of new money.

Example: If there is only 100 of something in existence and you own one. You own 1% of the total value of an item.
If someone later creates 50 more of them, your value drops to 1/150 to .66% of the total value of the items. You have effectively lost value because someone created 50 more.


Now, in WoW, think of it this way. A flight cost 400g back in the day. At that point, people normally had to save up for most of lvl 60 to lvl 70 to buy their ability to fly. This meant 400g had a real value.

Today, you complete missions that give you 400g for things like crushing some nuts and capturing some squirrels. If you want a bonus roll, you can spend 1000s of gold. This is because money has flown into the system. For that same flying to have the same feel, it would have to cost close to 100k today.

Now, gold sinks are there for the purposes of draining gold from the economy to prevent hyper inflation.

[Darsithis]

As others said: players create gold through their actions. The more gold, the more items get inflated because their value drops. To combat that and avoid an economic crash, gold is removed through repair costs and gold-sink items like mounts.

[clevin]

Interestingly, Blizzard defines how much gold is created. The WoD garrisons didn't have to be the high volume gold generators that they were. The missions we have now don't have to reward hundreds of gold. However, there's a psychological issue too. If my quest rewards for a regular old quest are 19g then I'm not doing a 16 hour mission for, say, 49g. It's not compelling.

[Bombercloner]

I might have a bad memory but I feel like repair costs(a gold sink) haven't gone up proportionally with the rate of inflation.

[LilSaihah]

I might have a bad memory but I feel like repair costs(a gold sink) haven't gone up proportionally with the rate of inflation.

Yes and no.

Repair costs haven't gone up but the rate of inflation has significantly dropped, mostly because garrison farming has gone byebye.

[Deleted]

I don't think it's cool to quote and thank each of you individually, but genuinely - thanks for the explanations. I am now more knowledgeable than before I made this thread and that was the aim, so thanks. It's interesting how transferable discussions of WoW's economy are to the real-world economy in many ways.