[Garland Bayley]

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.

Is this the phenomenon that Trump is trying to exploit with his golf courses? Is this the disease that has infected many courses from Augusta National?

Related effects are the snob effect: "preference for goods because they are different from those commonly preferred;" and the bandwagon effect: "preference for a good increases as the number of people buying them increases."

I have read that Shinnecock Hills is snobbish, but does it fit the definition of the snob effect? How is it different? Is extremly high initiation fees asked of invited members the difference that would make it and Sebonack fit the snob effect model?

Is the Bandon Resort experiencing the bandwangon effect, as evidenced by all the GCAers now willing to challenge the January/February weather there?

Are there so many people able to make a living as GCAs the result of "the counter-Veblen effect, in which preference for goods increases as their price falls?"

Is Sand Hills Veblen, Dismal River snob, Ballyneal bandwagon, and Wildhorse counter-Veblen?

What type of golf consumer are you? Veblen, snob, bandwagon, or counter-Veblen?


http://en.wikipedia.org/wiki/Veblen_good

[David_Tepper]

Garland -

Thanks for raising a interesting topic. I very much believe that some luxury goods (wines, clothes, real estate, etc.) are easier to sell the more, not less, is charged.  Golf very definitely falls into that group of products.

Rightly or wrongly, price implies status and that is a powerful attraction to some people.  

Is Sand Hills THAT much better than Wild Horse? Obviously, some people think it is.  

DT

[Garland Bayley]

David,

I like how you posed your question with "THAT" emphasized. For my golf experience, it would be hard more me to imagine that Sand Hills is more than 33.3% better. But I believe the price to be a much higher increment.

[Kalen Braley]

Ahh, the forum has gone econ 101 on us, very nice

I think as it pertains to golf courses, both of these principles are in effect.

Example 1:  Two daily fee golf courses are relatively close to one another, say 10 miles, 16km for our international friends.  While no two courses are alike they are similar in thier fun, variety, scenery, etc, etc.  The main difference is thier price.  One is priced at $40, the other at $60.  I gotta say that $40 course is going to get more play.

Example 2: Two daily fee courses are close together as in example 1. 1 course is just OK and the other is clearly superior in every category.  The OK one is priced at $30 and the superior is priced at $60.  I think in this case if the local base and tourism support it, the $60 course gets the more play.  And will continue to do so until its no longer deemed a better value, or worth the nice layout and such.

As for the "law of diminishing returns" as noted by Sean, I think this applies in pretty much every situation.  There will reach a point, when you're just not willing to pay that $60 to play the course over and over again for a specified time period.

[Phil McDade]

Garland:

Nice topic. I'm reminded of GCA poster Dan Moore's comments after a bunch of us played last year on the wonderfully unknown Spring Valley CC in southern Wisconsin, a Langford/Moreau design that's literally untouched except for the grassed-in bunkers. A neat course with some great and challenging greens. After playing on a beautiful October weekend day for the all-day rate of $23, Dan remarked (paraphrasing here): "It's the kind of place you're glad doesn't charge $50 a round, or it would be crowded."

[Garland Bayley]

...
Example 1:  Two daily fee golf courses are relatively close to one another, say 10 miles, 16km for our international friends.  While no two courses are alike they are similar in thier fun, variety, scenery, etc, etc.  The main difference is thier price.  One is priced at $40, the other at $60.  I gotta say that $40 course is going to get more play.
...

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.

[Garland Bayley]

Phil,

Great story! We will put down Spring Valley CC as a counter-Veblen course.
 

[Garland Bayley]

Let's make this a little more concrete. If you come to Portland, do you want to play The Reserve Vineyards and Golf for $60, or
Eastmoreland Golf Course for $30?

[Tom_Doak]

Garland:

In multi-course travel areas like Myrtle Beach and northern Michigan, it was discovered 15-20 years ago that a certain percentage of visitors just booked the highest-priced courses, thinking they were the best.  A couple of courses raised their green fees to try and reduce the number of rounds played ... and rounds increased because of their improved "status".

[David_Tepper]

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  

[John Kavanaugh]

David,

At your numbers it only costs $20 per day to be a member of Sand Hills.  Cypress, Augusta, Pine Valley, Seminole and a few others are worth it no matter how few times you actually play...Kinda like owning an orginal painting instead of a print.

[cary lichtenstein]

I must be all screwed up because I don't fit into any of these categories...I see the courses and judge them regardless of these sterotypes.

In Chicago my favorite course was Cog Hill #4 inspite of the fact that it was over an hour away from my home, and I liked it better than Medinah #3, Kemper Lakes, Butler, Rich Harvest Links or Shore Acres.

[Dan Kelly]

Garland:

In multi-course travel areas like Myrtle Beach and northern Michigan, it was discovered 15-20 years ago that a certain percentage of visitors just booked the highest-priced courses, thinking they were the best.  A couple of courses raised their green fees to try and reduce the number of rounds played ... and rounds increased because of their improved "status".

There was a story in ... I want to say The New York Times ... within the past couple of months about a college whose president was told that its tuition was too low.

They raised the tuition *dramatically*. Applications increased *dramatically*. (I'll see if I can't find the story.)

People are so screwed up ....

It's nice to see my fellow Gopher Prof. Veblen mentioned here. I'm no economist, but it seems to me he was considerably ahead of his time -- and would be amused, if not horrified, by the conspicuous consumption of the 21st century.

------ The story was in the NYTimes of 12/12/2006, under the headline "In New Twist on Tuition Game, Popularity Rises With the Price." The college in question was Ursinus College. I can't post a link, because it's a Times Select (pay-per-view) article.

[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.  

[David_Tepper]

John Kavanaugh -

I think Veblen would argue that the only "tangible benefit" a golf club can provide is the golf you get to play there.

If one belongs to a golf club they only visit 15-20 days a day, membership in the club provides NO tangible benefit the 345-350 days a year the member is not there. It may provide status, emotional comfort and a sense of well-being, but these are intangible benefits.

DT

[Andrew Balakshin]

http://www.golfclubatlas.com/forums2/index.php?board=1;action=display;threadid=16175;start=msg280399#msg280399

Here is another thread that talked about this.

[Doug Siebert]

I don't know that specific courses are Veblen, but as a whole golf courses probably are, as demonstrated by Tom Doak's anecdotal evidence.

If doctors published price lists for surgery, would you have Lasik done by the cheapest guy or the most expensive?  Not everyone here would say the most expensive, but I'll bet no one would say they'd pick the cheapest!

Its the same for golf courses.  In the absence of other information (ratings, reviews, stories from friends, etc.) given just the price of every course in an area we'd never been before, most of us probably wouldn't choose the most expensive course.  But I'll bet not a single GCAer would choose the least expensive.

But I don't think anyone can come up with a specific course for which this is true.  Pebble Beach costs a lot, but people want to play it because its Pebble Beach, not because it is the most expensive course around.  If Half Moon Bay raised its price to be higher than that of Pebble Beach, it wouldn't hurt Pebble's bookings, and would definitely hurt Half Moon Bay's bookings.

[Dan Boerger]

This is a really interesting topic that could veer in countless directions. Beyond the necessities of food, shelter, water, etc. the value of just about any additional product or service is consumer graded - or to coin the old cliche, one man's trash is another man's treasure. I have some close friends who would rather do just about anything than take up the game of golf. A visit to Pine Valley would be totally unappreciated by a person like that.

A $12 hamburger is still expensive and a $20 porterhouse is still cheap. And I've had good cheap hamburgers and bad expensive ones.

To me, I think what John K states is pretty apt (and insightful). If you don't appreciate the originality of expression or the events that have occured at a course like Merion then you are really missing something IMO. Also, if you really, really want to play golf in western Nebraska, on a great course that's exceptionally well designed than Sand Hills might be a bargain to you.

[Garland Bayley]

Garland:

In multi-course travel areas like Myrtle Beach and northern Michigan, it was discovered 15-20 years ago that a certain percentage of visitors just booked the highest-priced courses, thinking they were the best.  A couple of courses raised their green fees to try and reduce the number of rounds played ... and rounds increased because of their improved "status".

That clearly indicates golf to be a Veblen good. Sadly that is what makes it tough being a counter-Veblen consumer in this ANGC, Jack Nicklaus, Tom Fazio, golf world.

No one answered my question about choosing a course here in Portland. On my own, I would choose Eastmoreland every time. However, friends at work will always choose The Reserve Vineyards, so I will go there to be with friends.

[Garland Bayley]

David,

At your numbers it only costs $20 per day to be a member of Sand Hills.  Cypress, Augusta, Pine Valley, Seminole and a few others are worth it no matter how few times you actually play...Kinda like owning an orginal painting instead of a print.

John,

There are lots of original paintings in the world. Why are you not considering Wildhorse to be an original painting of some merit?

When you join Sand Hills and then not play it, because you own the original painting so there is no need to play it, then I will take you seriously.

[Garland Bayley]

I must be all screwed up because I don't fit into any of these categories...I see the courses and judge them regardless of these sterotypes.

In Chicago my favorite course was Cog Hill #4 inspite of the fact that it was over an hour away from my home, and I liked it better than Medinah #3, Kemper Lakes, Butler, Rich Harvest Links or Shore Acres.

Right on Cary. It's about the golf!

[Garland Bayley]

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".

[Garland Bayley]

...
To me, I think what John K states is pretty apt (and insightful). If you don't appreciate the originality of expression or the events that have occured at a course like Merion then you are really missing something IMO. Also, if you really, really want to play golf in western Nebraska, on a great course that's exceptionally well designed than Sand Hills might be a bargain to you.

I take it you think the "originality of expression" that occurred at Merion is worth many times the "originality of expresssion" that occurred at Lederach. I respectfully disagree.  

[Dan Boerger]

Garland - Fully agree. Beauty, as they say, is in the eye of the beholder. If you (or anyone for that matter) think a local par 3 muni is the absolute best golf course ever designed and no other course gives you the enjoyment you get from it, then a trip to Cypress and Pebble at the expense of said muni be an opportunity lost.

Which brings me back full circle to wine which was mentioned at the start of this thread (another passion) ... if esteemed critic Robert Parker rates a new wine 95+, the demand increases significantly and (if the retailer is smart) so does the price of the bottle. If your palate and Mr. Parker's are not in sync, you can usually get the "style" of wine you want at a pretty good price.  

[Garland Bayley]

Dan,

You follow Robert Parker, I'll follow Mr. Franzia (of two buck Chuck fame). Mr. Franzia points out that almost all wine is not worth what you pay for it. While Mondavi and Opus were engaging in Veblen goods sales, Mr. Franzia does quite well with counter-Veblen goods sales.

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