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

Brown Matt, Daniel Rascher (), McEvoy Chad and Nagel Mark

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Alchian-Allen Theorem; Third Law of Demand; Golf Tourism; Bundling (search for similar items in EconPapers)
JEL-codes: D12 L83 (search for similar items in EconPapers)
Date: 2007
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Related works:
Journal Article: Treatment of Travel Expenses by Golf Course Patrons: Sunk or Bundled Costs and the First and Third Laws of Demand (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25830

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