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Treatment of Travel Expenses by Golf Course Patrons: Sunk or Bundled Costs and the First and Third Laws of Demand

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  • Matt, Brown
  • Daniel, Rascher
  • Chad, McEvoy
  • Mark, Nagel

Abstract

To attract golf patrons, sport managers must understand consumption patterns of the golfer. Importantly, the treatment of travel costs must be understood. According to the Alchian-Allen (1964) theorem, golfers treat travel costs as bundled costs (third law of economic demand) whereas classical consumer theory indicates that golfers treat travel costs as sunk costs (first law of economic demand). The purpose of this study was to determine if golf patrons treated travel costs as sunk costs or if they treated travel costs as a bundled cost. Data from a survey of course patrons in Ohio support the treatment of travel costs as bundled costs by golf course patrons, especially those classified as tourists. Managers should utilize geographic segmentation in choosing whom to market their course based upon their product’s price compared to area competitors, as shown by the strong, positive correlation found between distance traveled and cost of green fees.

Suggested Citation

  • Matt, Brown & Daniel, Rascher & Chad, McEvoy & Mark, Nagel, 2007. "Treatment of Travel Expenses by Golf Course Patrons: Sunk or Bundled Costs and the First and Third Laws of Demand," MPRA Paper 25830, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25830
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    References listed on IDEAS

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    1. Borcherding, Thomas E & Silberberg, Eugene, 1978. "Shipping the Good Apples Out: The Alchian and Allen Theorem Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 131-138, February.
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    More about this item

    Keywords

    Alchian-Allen Theorem; Third Law of Demand; Golf Tourism; Bundling;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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