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Why Do We Tip Taxicab Drivers?

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  • David Flath

Abstract

The leading economic explanation for tipping—that is, explanation why the practice is socially beneficial, not why individuals leave tips even though it is not narrowly advantageous to them—is that it confers an incentive to provide personal services. This fits many instances in which tipping is common but does not fit the taxicab business very well. I propose a novel explanation for tipping that does fit the taxi case. It is that tipping amounts to Lindahl pricing of the services of vacant cabs (essentially, reduced waiting time), a local public good for taxi customers.

Suggested Citation

  • David Flath, 2012. "Why Do We Tip Taxicab Drivers?," Japanese Economy, Taylor & Francis Journals, vol. 39(3), pages 69-76.
    • Handle: RePEc:mes:jpneco:v:39:y:2012:i:3:p:69-76
    DOI: 10.2753/JES1097-203X390304
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    References listed on IDEAS

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    Cited by:

    1. Amir B. Ferreira Neto & Adam Nowak & Amanda Ross, 2017. "Do tourists tip more than local consumers? Evidence of taxi rides in New York City," Working Papers 17-14, Department of Economics, West Virginia University.
    2. Amir B. Ferreira Neto & Adam Nowak & Amanda Ross, 2019. "Do Tourists Tip More Than Local Consumers? Evidence from Taxi Rides in New York City," International Regional Science Review, , vol. 42(3-4), pages 281-306, May.

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