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Who Do We Tip and Why? An Empirical Investigation

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Author Info
Ofer H. Azar (Ben-Gurion University of the Negev)

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Abstract

An important question about social norms is whether they are created to increase welfare; I address it by examining the characteristics of tipped and non-tipped occupations. Tipping prevalence is negatively correlated with worker’s income and consumer’s monitoring ability and positively with consumer’s income and closeness between the worker and the consumer. The results refute a common belief that tipping exists to improve economic efficiency by lowering monitoring costs. Tipping, however, is more prevalent when consumers feel empathy and compassion for workers and want to show gratitude for good service, suggesting that tipping might increase welfare if welfare includes psychological utility.

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File URL: http://129.3.20.41/eps/lab/papers/0502/0502005.pdf
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Publisher Info
Paper provided by EconWPA in its series Labor and Demography with number 0502005.

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Length: 20 pages
Date of creation: 20 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0502005

Note: Type of Document - pdf; pages: 20
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Web page: http://129.3.20.41

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Related research
Keywords: Tipping; Service industries; social norms; social welfare; behavioral economics; feelings; emotions;

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Find related papers by JEL classification:
C9 - Mathematical and Quantitative Methods - - Design of Experiments
A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
L8 - Industrial Organization - - Industry Studies: Services
D0 - Microeconomics - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ofer H. Azar, 2003. "Optimal Monitoring with External Incentives: The Case of Tipping," Industrial Organization 0312004, EconWPA. [Downloadable!]
    Other versions:
  2. Wessels, Walter John, 1997. "Minimum Wages and Tipped Servers," Economic Inquiry, Oxford University Press, vol. 35(2), pages 334-49, April.
  3. Loewenstein, George, 1999. "Because It Is There: The Challenge of Mountaineering . . . for Utility Theory," Kyklos, Blackwell Publishing, vol. 52(3), pages 315-43.
  4. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall. [Downloadable!] (restricted)
  5. Jacob, Nancy L & Page, Alfred N, 1980. "Production, Information Costs, and Economic Organization: The Buyer Monitoring Case," American Economic Review, American Economic Association, vol. 70(3), pages 476-78, June.
  6. Bodvarsson, Orn B. & Gibson, William A., 1994. "Gratuities and customer appraisal of service: Evidence from Minesota restaurants," The Journal of Socio-Economics, Elsevier, vol. 23(3), pages 287-302. [Downloadable!] (restricted)
  7. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August. [Downloadable!] (restricted)
  8. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September. [Downloadable!] (restricted)
  9. Ofer H. Azar, 2003. "What sustains social norms and how they evolve? The case of tipping," Others 0309001, EconWPA. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Azar, Ofer H., 2005. "Incentives and Service Quality in the Restaurant Industry: The Tipping – Service Puzzle," MPRA Paper 4457, University Library of Munich, Germany, revised 2006. [Downloadable!]
  2. Azar, Ofer H., 2006. "Tipping, firm strategy, and industrial organization," MPRA Paper 4485, University Library of Munich, Germany. [Downloadable!]
  3. Ofer H. Azar, 2005. "The Social Norm of Tipping: Does it Improve Social Welfare?," Others 0503013, EconWPA. [Downloadable!]
    Other versions:
  4. Azar, Ofer H. & Tobol, Yossi, 2006. "Tipping as a strategic investment in service quality: An optimal-control analysis of repeated interactions in the service industry," MPRA Paper 4393, University Library of Munich, Germany, revised 2007. [Downloadable!]
    Other versions:
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