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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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Author Info

  • Matthew T. Brown

    ()
    (University of South Carolina)

  • Daniel A. Rascher

    ()
    (University of San Francisco)

  • Chad D. McEvoy

    ()
    (Illinois State University)

  • Mark S. Nagel

    (University of South Carolina)

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. The strong, positive correlation found between distance traveled and the cost of greens fees enables managers to utilize geographic segmentation in choosing to whom to market their course based upon their product’s price compared to area competitors.

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Bibliographic Info

Article provided by Fitness Information Technology in its journal International Journal of Sport Finance.

Volume (Year): 2 (2007)
Issue (Month): 1 (February)
Pages: 45-53

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Handle: RePEc:jsf:intjsf:v:2:y:2007:i:1:p:45-53

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Related research

Keywords: Alchian-Allen theorem; third law of demand; golf tourism; bundling;

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  1. Yoram Bauman, 2004. "Shipping the Good Apples Out: A New Perspective," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 42(3), pages 534-536, July.
  2. Laura Razzolini & William F. Shughart & Robert D. Tollison, 2003. "On the Third Law of Demand," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 41(2), pages 292-298, April.
  3. Bertonazzi, Eric P & Maloney, Michael T & McCormick, Robert E, 1993. "Some Evidence on the Alchian and Allen Theorem: The Third Law of Demand?," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 31(3), pages 383-93, July.
  4. Cowen, Tyler & Tabarrok, Alexander, 1995. "Good Grapes and Bad Lobsters: Applying the Alchian and Allen Theorem," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 33(2), pages 253-56, April.
  5. 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, University of Chicago Press, vol. 86(1), pages 131-38, February.
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