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Economics and Restaurant Gratuities: Determining Tip Rates
Author(s) -
Bodvarsson öRn B.,
Gibson William A.
Publication year - 1997
Publication title -
american journal of economics and sociology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.199
H-Index - 38
eISSN - 1536-7150
pISSN - 0002-9246
DOI - 10.1111/j.1536-7150.1997.tb03460.x
Subject(s) - rule of thumb , norm (philosophy) , service (business) , stochastic game , economics , tipping point (physics) , marketing , consumption (sociology) , business , advertising , microeconomics , sociology , political science , computer science , engineering , law , social science , algorithm , electrical engineering
A bstract IS tipping in restaurants simply a social norm where people tip on the basis of some rule of thumb (15% of bill size for example)? Using evidence gathered from surveys of nearly 700 diners in 7 Minnesota restaurants, it is argued that tipping is both a social norm and a means of rewarding good service. Survey evidence suggests that diners use rules of thumb as starting points and then vary gratuities on the basis of service just received, expected future service, whether they dine alone or with a group, alcohol consumption and location of the restaurant. Tipping may be viewed as a game played indirectly between diners in which each diner contemplates tipping, or not tipping, based on expectations of future service and the tipping behavior of other diners. Tipping is commonplace as long as people expect better service when they tip more and the expected payoff to tipping rises when more people tip, but rare otherwise. Neo‐classical economics is quite successful in predicting tip size as long as diners view tipping as a pecuniary cost of buying service.