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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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25830.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:25830

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Keywords: Alchian-Allen Theorem; Third Law of Demand; Golf Tourism; Bundling;

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  1. 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, vol. 31(3), pages 383-93, July.
  2. Laura Razzolini & William F. Shughart & Robert D. Tollison, 2003. "On the Third Law of Demand," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 292-298, April.
  3. Cowen, Tyler & Tabarrok, Alexander, 1995. "Good Grapes and Bad Lobsters: Applying the Alchian and Allen Theorem," Economic Inquiry, Western Economic Association International, vol. 33(2), pages 253-56, April.
  4. 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 131-38, February.
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