(This abstract was borrowed from another version of this item.)"> (This abstract was borrowed from another version of this item.)">
[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/kap/jeczfn/v85y2005i2p141-173.html
   My bibliography  Save this article

The Social Norm of Tipping: Does it Improve Social Welfare?

Author

Listed:
  • Ofer Azar
Abstract
Some economists believe that social norms are created to improve welfare where the market fails. I show that tipping is such a norm, using a model in which a waiter chooses service quality and then a customer chooses the tip. The customer’s utility depends on the social norm about tipping and feelings such as embarrassment and fairness. The equilibrium depends on the exact social norm: higher sensitivity of tips to service quality (according to the norm) yields higher service quality and social welfare. Surprisingly, high tips for low quality may also increase service quality and social welfare.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Ofer Azar, 2005. "The Social Norm of Tipping: Does it Improve Social Welfare?," Journal of Economics, Springer, vol. 85(2), pages 141-173, August.
    • Handle: RePEc:kap:jeczfn:v:85:y:2005:i:2:p:141-173
    DOI: 10.1007/s00712-005-0123-0
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00712-005-0123-0
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s00712-005-0123-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Lynn, Michael & Grassman, Andrea, 1990. "Restaurant tipping: an examination of three 'rational' explanations," Journal of Economic Psychology, Elsevier, vol. 11(2), pages 169-181, June.
    3. Ofer H. Azar, 2004. "Optimal Monitoring with External Incentives: The Case of Tipping," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 170-181, July.
    4. Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May.
    5. Ofer Azar, 2005. "Who do we tip and why? An empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 37(16), pages 1871-1879.
    6. Ofer H. Azar, 2004. "Optimal Monitoring with External Incentives: The Case of Tipping," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 170-181, July.
    7. Ruffle, Bradley J., 1998. "More Is Better, But Fair Is Fair: Tipping in Dictator and Ultimatum Games," Games and Economic Behavior, Elsevier, vol. 23(2), pages 247-265, May.
    8. Dufwenberg, Martin & Kirchsteiger, Georg, 2004. "A theory of sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 47(2), pages 268-298, May.
    9. Wessels, Walter John, 1997. "Minimum Wages and Tipped Servers," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 334-349, April.
    10. Conlin, Michael & Lynn, Michael & O'Donoghue, Ted, 2003. "The norm of restaurant tipping," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 297-321, November.
    11. Azar, Ofer H., 2004. "What sustains social norms and how they evolve?: The case of tipping," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 49-64, May.
    12. Ruffle, Bradley J., 1999. "Gift giving with emotions," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 399-420, July.
    13. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
    14. Ofer H. Azar, 2003. "The implications of tipping for economics and management," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 30(10), pages 1084-1094, October.
    15. Azar, Ofer H., 2007. "Why pay extra? Tipping and the importance of social norms and feelings in economic theory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(2), pages 250-265, April.
    16. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation," International Economic Association Series, in: L.-A. Gérard-Varet & S.-C. Kolm & J. Mercier Ythier (ed.), The Economics of Reciprocity, Giving and Altruism, chapter 7, pages 153-173, Palgrave Macmillan.
    17. 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 728-741, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ofer H. Azar, 2007. "Do people tip strategically, to improve future service? Theory and evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 515-527, May.
    2. Parra, Daniel, 2020. "The Role of Suggestions and Tips in Distorting a Third Party’s Decision," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 11(2), pages 1-21.
    3. Ofer H. Azar & Yossi Tobol, 2008. "Tipping as a Strategic Investment in Service Quality: An Optimal‐Control Analysis of Repeated Interactions in the Service Industry," Southern Economic Journal, John Wiley & Sons, vol. 75(1), pages 246-260, July.
    4. Holland, Steven J., 2009. "Tipping as risk sharing," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(4), pages 641-647, August.
    5. Ofer H. Azar, 2003. "The Social Norm of Tipping: A Review," Others 0309006, University Library of Munich, Germany.
    6. Agnès Festré, 2010. "Incentives And Social Norms: A Motivation‐Based Economic Analysis Of Social Norms," Journal of Economic Surveys, Wiley Blackwell, vol. 24(3), pages 511-538, July.
    7. Daniel Belanche & Luis V. Casaló & Carlos Flavián & Alfredo Pérez-Rueda, 2021. "The role of customers in the gig economy: how perceptions of working conditions and service quality influence the use and recommendation of food delivery services," Service Business, Springer;Pan-Pacific Business Association, vol. 15(1), pages 45-75, March.
    8. Elif Aydin, Asli & Acun, Yüksel, 2019. "An investigation of tipping behavior as a major component in service economy: The case of taxi tipping," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 78(C), pages 114-120.
    9. Lynn, Michael, 2016. "Why are we more likely to tip some service occupations than others? Theory, evidence, and implications," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 134-150.
    10. Ofer H. Azar, 2020. "The Economics of Tipping," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 215-236, Spring.
    11. Azar, Ofer H., 2009. "Tipping motivations and behavior in the US and Israel," MPRA Paper 20304, University Library of Munich, Germany.
    12. Azar, Ofer H., 2007. "Why pay extra? Tipping and the importance of social norms and feelings in economic theory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(2), pages 250-265, April.
    13. Ofer Azar, 2009. "Incentives and service quality in the restaurant industry: the tipping-service puzzle," Applied Economics, Taylor & Francis Journals, vol. 41(15), pages 1917-1927.
    14. Azar, Ofer H., 2006. "Tipping, firm strategy, and industrial organization," MPRA Paper 4485, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ofer H. Azar & Yossi Tobol, 2008. "Tipping as a Strategic Investment in Service Quality: An Optimal‐Control Analysis of Repeated Interactions in the Service Industry," Southern Economic Journal, John Wiley & Sons, vol. 75(1), pages 246-260, July.
    2. Azar, Ofer H., 2006. "Tipping, firm strategy, and industrial organization," MPRA Paper 4485, University Library of Munich, Germany.
    3. Azar, Ofer H., 2007. "Why pay extra? Tipping and the importance of social norms and feelings in economic theory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(2), pages 250-265, April.
    4. Ofer Azar, 2009. "Incentives and service quality in the restaurant industry: the tipping-service puzzle," Applied Economics, Taylor & Francis Journals, vol. 41(15), pages 1917-1927.
    5. Azar, Ofer H., 2011. "Business strategy and the social norm of tipping," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 515-525, June.
    6. Azar, Ofer H., 2009. "Tipping motivations and behavior in the US and Israel," MPRA Paper 20304, University Library of Munich, Germany.
    7. Matt Parrett, 2006. "An Analysis of the Determinants of Tipping Behavior: A Laboratory Experiment and Evidence from Restaurant Tipping," Southern Economic Journal, John Wiley & Sons, vol. 73(2), pages 489-514, October.
    8. Ofer H. Azar, 2007. "Do people tip strategically, to improve future service? Theory and evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 515-527, May.
    9. Lynn, Michael, 2015. "Service gratuities and tipping: A motivational framework," Journal of Economic Psychology, Elsevier, vol. 46(C), pages 74-88.
    10. Ofer H. Azar, 2003. "The Social Norm of Tipping: A Review," Others 0309006, University Library of Munich, Germany.
    11. Azar, Ofer H., 2004. "What sustains social norms and how they evolve?: The case of tipping," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 49-64, May.
    12. Ofer Azar, 2005. "Who do we tip and why? An empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 37(16), pages 1871-1879.
    13. Ofer H. Azar, 2003. "The implications of tipping for economics and management," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 30(10), pages 1084-1094, October.
    14. Azar, Ofer H. & Yosef, Shira & Bar-Eli, Michael, 2015. "Restaurant tipping in a field experiment: How do customers tip when they receive too much change?," Journal of Economic Psychology, Elsevier, vol. 50(C), pages 13-21.
    15. Linfeng Chen, 2021. "Reciprocity Game," Bulletin of Economic Research, Wiley Blackwell, vol. 73(1), pages 131-141, January.
    16. Lynn, Michael, 2016. "Why are we more likely to tip some service occupations than others? Theory, evidence, and implications," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 134-150.
    17. Agnès Festré, 2010. "Incentives And Social Norms: A Motivation‐Based Economic Analysis Of Social Norms," Journal of Economic Surveys, Wiley Blackwell, vol. 24(3), pages 511-538, July.
    18. Ofer H. Azar, 2004. "Optimal Monitoring with External Incentives: The Case of Tipping," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 170-181, July.
    19. Saunders, Stephen G. & Lynn, Michael, 2010. "Why tip? An empirical test of motivations for tipping car guards," Journal of Economic Psychology, Elsevier, vol. 31(1), pages 106-113, February.
    20. Holland, Steven J., 2009. "Tipping as risk sharing," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(4), pages 641-647, August.

    More about this item

    Keywords

    tipping; social norms; Z13; J30; D11;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jeczfn:v:85:y:2005:i:2:p:141-173. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.