[Kalen Braley]

I too am in the camp of Cary.

Go see all the courses first and return to the ones that are worth playing over and over again.  If they turn out to be the cheaper ones, then thats just a sweet added bonus.  

But I think Garland does make a really good point about not having local knowledge, or just limited information.  If I don't know anything about either, I would probably assume like most others that the $60 course is nicer.

But then again, its rare I ever play any new course without having researched it at least a little bit or driven by it to get a basic impression of the course.

[Andy Troeger]

The nice thing now is that there is generally a lot of information that can be found on just about any course before making a decision on "where to play."

While I admit that there sure as heck are lot of people that go for the most expensive item, I'm not one of them. I've played a few of the pricy ones, but I don't look for them unless the course looks like something I really want to see (ex. Whistling Straits/Blackwolf Run).

[Jim Nugent]

Garland -

Thinking about my Sand Hills - Wild Horse example a bit more, let us assume the initiation fee at a club such as Sand Hills is $50,000 and annual dues are $4,800 ($400 per month).

At 5% per year, the opportunity cost of the initiation fee is $2,500 each year, making the annual cost of being a member $7,300. If the typical member plays 20 rounds per year, the cost per round is $365.

I am not sure what the green fees are at Wild Horse ($50?, $75?).

From a strictly economic point of view, the "market" is saying the golf experience at one place is roughly 5 times the value of the other. We all know that is not the case.

DT  

David, the market is not really saying that.  It's just saying that some people are willing to pay five times as much.  There is no linear relationship between price and value.  If money is not an issue, many people are glad to pay a whole lot more, for a little bit more enjoyment or quality.  

I suspect lots of goods are Veblen goods.  The definition says nothing about demand, or what people are willing to pay.  Simply that people prefer more expensive goods.  Rightly or wrongly, higher prices raise the aura of all sorts of things.  

[Garland Bayley]

...If money is not an issue, many people are glad to pay a whole lot more, for a little bit more enjoyment or quality.  
...

I am not sure where the more enjoyment comes from. But I have to ask, how they know they are getting more quality at Sand Hills over Wildhorse? Because of the price?

For the GCAer, because Ran and Tom D rave a little more about Sand Hills than Wildhorse is an appropriate answer. But what about the nonGCAer?

[David_Tepper]

Jim Nugent -

If you read my first (and third) post on this thread, you will see I very much agree with what you are saying. Luxury goods provide a sense of status & emotional well-being that is beyond the "tangible benefit" they offer. Golf has been successfully marketed as a luxury good for many, many years. In a real sense, its pricing is in-elastic.

My second post, the one you quoted, merely tried to separate/quantify the tangible & intangible benefits.

As purely an economic exercise, it would be interesting to see how high the green fee at Pebble Beach could be raised before people stopped coming.

DT  

[wsmorrison]

Where is the inflection point where the fee is high yet still encourages multiple visits rather than being so high that it is considered a once in a lifetime experience?  Pebble Beach is beyond my own inflection point; that is at the prices they charge, I will never play there again.  I played multiple times in the 1980s and 1990s, but no more.  The cost is ridiculous, all the more so for a course I rate no higher than a Doak 7.  Pinehurst #2 is beyond the inflection point as well, but not as much so since it isn't as high and it is a slightly better golf course.  

Given that they are resort courses and I suppose are fully booked year in and year out, their model works.  It doesn't work for me though.

This analysis doesn't work for one's home club.  If I sat down and figured out the cost per round of golf, it would be very high, though not nearly as high as PB or Pinehurst #2 and much less if I consider the cost per round for my family.  There is a lot more offered at one's home club in terms of social interaction, dining, etc. that makes it an unfair comparison in any case.

[Dan Boerger]

Garland - I am in total agreement that most wine is not worth what one pays for it --- the best example of that, IMO, is the wine Mr. Franzia markets!

[Jason McNamara]

Let's change this a little. Say you are from out of town, you ask the desk clerk, who you assume probably doesn't know a lot. He says as far as he knows they are about the same. Now that's all you know. Which do you pick. The theory is that if golf is a Veblen good, then you choose the $60 course.

Yeah, but then you're throwing rather imperfect information into the mix.  

Yes, but 99.9% of all golfers don't belong to GCA.com and a huge percentage of them make there decisions on "rather imperfect information".

That's one of the reasons this site exists!

I mean, other than access, of course....  

[RJ_Daley]

Sorry I missed this thread until today.  It is very interesting.  I posted some thoughts similar to these ideas on Mucci's "money as an object" influencing architecture.  Ironically, that thread wandered into the Sand Hills and Wild Horse comparisons, as well.

I think that I have seen the Veblen effect many times whereby a higher price seems to automatically command a higher desire to covet something or some service, rather than a pure evaluation of quality and value by a general group of consumers.

But, it is the difference in origin of which particular socio/economic group of consumers is buying and doing the valuations according to their own culture and attitudes.  

Taking the Sand Hills, Wild Horse comparisons:  The courses are vastly different in their pricing.  While SH is purely private with an accompanied guest fee policy; WH is open to public daily fee and has a membership fee component.  

The group that supports and belongs and pays the freight at SH are a national, wealthy and exclusive group of consumers.  Their home region and social strata values are different than the group that actually supports WH.

Yes, many that make the trip up to SH stop to play WH on the way.  But, they aren't the core group that supports WH and keeps it open.  

It is the regional - local player that keeps WH afloat.  They get ~$40 a round at WH, and $450-500 a year membership fee.  That is compared to ~$140-50 all day accompanied guest fee play at SH, and I don't even know the initiation and yearly's there.  Suffice it to say, a whole lot more!  

If it were up to regional consumers, WH can barely make it now in a competitive situation because the regional consumers, with a regional set of expectations, think $40 is too much!!!  Many of them will make an anti-Veblen decison to play the cheaper and crappier local courses for $20-25, ignoring the light year of difference in quality of the golf course.  

And, unless they are among a very few wealthy locals that do belong to SH, the locals only think of SHGC as some enclave of wealthy folk from one of the coasts.  Even those that have significant wealth in that region think SH and DR fees for golf membership are not great value because culturally they would never pay that much for golf anywhere.  

[Dan Kelly]

Is there an economist in the house?

As I said, I am not one.

But I'm curious as to the accuracy of this definition: "According to wikipedia, 'Commodities are Veblen goods if people's preference for buying them increases as a direct function of their price.' Examples are wines and perfumes."

I learned, way back when, that "commodities" are things that are indistinguishable from producer to producer. Things like salt, and wheat, and sugar.

If what I learned is right: Wines and perfumes are decidedly not commodities.

And neither are golf courses (except, perhaps in Myrtle Beach?).

[Garland Bayley]

Dan,

If you follow the wikipedia link in the first post, it allows you to link to their definition of commodity

[Kalen Braley]

Is there an economist in the house?

As I said, I am not one.

But I'm curious as to the accuracy of this definition: "According to wikipedia, 'Commodities are Veblen goods if people's preference for buying them increases as a direct function of their price.' Examples are wines and perfumes."

I learned, way back when, that "commodities" are things that are indistinguishable from producer to producer. Things like salt, and wheat, and sugar.

If what I learned is right: Wines and perfumes are decidedly not commodities.

And neither are golf courses (except, perhaps in Myrtle Beach?).

I hate to be a stickler here, but I don't know if commodities have to fit that strict definition.  Here is thier definition:

1. an article of trade or commerce, esp. a product as distinguished from a service.  
2. something of use, advantage, or value.  
3. Stock Exchange. any unprocessed or partially processed good, as grain, fruits, and vegetables, or precious metals.

So based on these 3 definitions, a commodity can be just about anything.

[Dan Kelly]

So based on these 3 definitions, a commodity can be just about anything.

In other words: We have here another precise word mushified -- and, thereby, rendered considerably less useful (like, say, "biweekly" -- which, as a dictionary search will show, used to mean something and no longer does).

I'm feeling old ....

[Dan Kelly]

If you follow the wikipedia link in the first post, it allows you to link to their definition of commodity

I'm hoping for something more definitive than Wikipedia.

Favorite Onion headline of recent months: "Wikipedia Celebrates 750 Years of American Independence."

[Kalen Braley]

So based on these 3 definitions, a commodity can be just about anything.

In other words: We have here another precise word mushified -- and, thereby, rendered considerably less useful (like, say, "biweekly" -- which, as a dictionary search will show, used to mean something and no longer does).

I'm feeling old ....

lol...I was just going to add Dan that after looking around this word does have many meanings.  Lets just all agree to one meaning and go from there because alas you are right as one of its meanings is as you described.

[Garland Bayley]

So based on these 3 definitions, a commodity can be just about anything.

In other words: We have here another precise word mushified -- and, thereby, rendered considerably less useful (like, say, "biweekly" -- which, as a dictionary search will show, used to mean something and no longer does).

I'm feeling old ....

If it is any consolation, my Webster's NewWorld College Edition, 1980 is even mushier: "1. any useful thing. 2. anything bought and sold ..."

[Garland Bayley]

Is this the underpinnings of the Veblen effect?

A study in the Proceedings of the National Academy of Science show that higher cost causes people to like wine better. A report on the study can be found by following the link.

Higher Price Means More Pleasure

How well does this apply to golf?

Interestingly I was in the pro shop of one of the local munis and the pro was claiming that people raved about Bandon, because they paid so much they had too.

[Tom_Doak]

Garland:

That last point is an interesting hypothesis, but does not explain all the people who are booking return trips a year from their departure, unless they are REALLY anxious to show others they made a smart choice.

Can't believe we got to page 2 and nobody mentioned Shadow Creek or Cascata.  Was Veblen from Vegas?

[Garland Bayley]

... Was Veblen from Vegas?

Nope, he was a Norwegian from Wisconsin, Yale PHD, and taught at U of Chicago and Stanford amonst other places.


As far as the local muni in question, although it is closest to where I live, I don't find much motivation for playing there.
I don't think the pro has any credibility when it comes to explaining why you might choose other courses besides his, especially Bandon.

[Garland Bayley]

Garland:

...but does not explain all the people who are booking return trips a year from their departure, ...

That in part would be the bandwagon effect.

[Andy Troeger]

Obviously some things, including golf courses, are just high quality which ends up allowing for high costs, I think there is something to the Veblen effect.

I kind of think that people after they have paid a lot of money are dang determined to like the place so they don't look stupid for just having paid a lot of money to play a golf course they didn't even like! In some cases they probably actually BELIEVE they like the place, and in others they just claim they do for the world of outside opinion.

Just my take of course

[Jim Nugent]

I'm unclear about the meaning of a Veblen good.  Does it mean demand increases with price?  Or simply that people think the product or service is 'better', if it costs more?

Sounds more like the second.  If so, I suspect most goods are Veblen.  

If it's the first, there are very few, and golf overall is not one of them.    

[Craig Van Egmond]

Garland,

               Having played both courses in your Portland example I would choose Eastmoreland.

[Paul Stephenson]

Is there an economist in the house?

My degree is in Business and Economics, but I have taught Introductory Economics at the senior high school/first year college level (A levels for our UK friends) for years.

I think the answer is none.  

Veblen goods (and Geffen goods at the poor end of the spectrum) both assume that the demand curve is of a positive slope (price goes up/quantity demanded goes up) and not a negative one.  

There is an important distinction to be made between demand and quantity demanded.  Price does not affect demand...it only affects the quantity demanded.  If I had a dime for everytime I drilled this into students and they still got it wrong, I could play Pebble Beach numerous times and not worry about the cost.

The long and short of it is that there have not been any proven examples of Veblen or Geffen goods, and that it wasn't some other determinate that changed demand. One argument I liked while looking to get my facts straight was this, "if they existed, don't you think we would have found one by now."

For Geffen goods it is a larger income effect (I've become so poor that the only thing I can now afford is the very thing that made me poorer...e.g. bread) which shifts the demand curve.

For Veblen goods my guess would be that it is not only an income effect (I can now afford it) but rather a change in my preferences and tastes (All the cool kids play Bandon in January...me too).  As for the university who raised tuition, an increase in perceived value may have altered preferences and tastes...an article in the NY Times wouldn't hurt either.

I hope this helps.  It is a lot easier to explain with graphs.

[Garland Bayley]

...The long and short of it is that there have not been any proven examples of Veblen or Geffen goods, and that it wasn't some other determinate that changed demand. ...

If you can't find any using your definition, then perhaps your definition is wrong. Is that why every time you make a submission to wikipedia, someone edits it out.

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