Do people tip strategically, to improve future service? Theory and evidence
AbstractA central question about tipping is whether people tip strategically, to improve future service, or only because tipping is a social norm. I present a theoretical model that incorporates psychological utility associated with tipping (because it is a social norm) and allows tipping to be motivated also by future service considerations. The model predicts that if future service is a reason for tipping, the sensitivity of tips to service quality should be higher for repeating customers than for non-repeating ones. Surveys of 597 restaurant customers are analysed and suggest that future service is not a reason for tipping.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 40 (2007)
Issue (Month): 2 (May)
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- 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,
Southern Economic Association, vol. 75(1), pages 246-260, July.
- 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.
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- Lynn, Michael & Jabbour, Patrick & Kim, Woo Gon, 2012. "Who uses tips as a reward for service and when? An examination of potential moderators of the service–tipping relationship," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 90-103.
- Azar, Ofer H., 2009. "Tipping motivations and behavior in the US and Israel," MPRA Paper 20304, University Library of Munich, Germany.
- D'Agostino, Elena & Lisciandra, Maurizio, 2012. "Enforceable vs. non-enforceable contracts: a theoretical appraisal with fair players," MPRA Paper 41261, University Library of Munich, Germany.
- Ofer Azar, 2009.
"Incentives and service quality in the restaurant industry: the tipping-service puzzle,"
Taylor and Francis Journals, vol. 41(15), pages 1917-1927.
- 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.
- Holland, Steven J., 2009. "Tipping as risk sharing," The Journal of Socio-Economics, Elsevier, vol. 38(4), pages 641-647, August.
- Azar, Ofer H., 2011. "Business strategy and the social norm of tipping," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 515-525, June.
- Azar, Ofer H., 2012. "The effect of the minimum wage for tipped workers on firm strategy, employees and social welfare," Labour Economics, Elsevier, vol. 19(5), pages 748-755.
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