Advanced Search
MyIDEAS: Login to save this paper or follow this series

Incentives and Service Quality in the Restaurant Industry: The Tipping – Service Puzzle

Contents:

Author Info

  • Azar, Ofer H.

Abstract

Tipping is a significant economic activity (tips in the US food industry alone amount to about $42 billion annually) that was claimed to improve service quality and increase economic efficiency, because it gives incentives to provide excellent service, and therefore allows to avoid costly monitoring of workers. The article suggests that this common wisdom might be wrong. A simple model shows formally that tips can improve service only if they are sensitive enough to service quality. Empirical evidence suggests that tips are hardly affected by service quality. Nevertheless, rankings of service quality by customers are very high; the co-existence of these two findings is denoted "the tipping – service puzzle,” and several possible explanations for it are offered.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/4457/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4457.

as in new window
Length:
Date of creation: 2005
Date of revision: 2006
Handle: RePEc:pra:mprapa:4457

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Tipping; Service quality; Social norms; Waiters; Restaurants; The hospitality industry;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  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. Azar, Ofer H., 2003. "The Effect of External Incentives on Profits and Firm-Provided Incentives Strategy," MPRA Paper 4456, University Library of Munich, Germany, revised 2007.
  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, Southern Economic Association, vol. 75(1), pages 246-260, July.
  4. Ofer H. Azar, 2005. "The Social Norm of Tipping: Does it Improve Social Welfare?," Others, EconWPA 0503013, EconWPA.
  5. John Anderson & Orn Bodvarsson, 2005. "Do higher tipped minimum wages boost server pay?," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(7), pages 391-393.
  6. Azar, Ofer H., 2004. "What sustains social norms and how they evolve?: The case of tipping," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 54(1), pages 49-64, May.
  7. Conlin, Michael & Lynn, Michael & O'Donoghue, Ted, 2003. "The norm of restaurant tipping," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 52(3), pages 297-321, November.
  8. Ruffle, Bradley J., 1998. "More Is Better, But Fair Is Fair: Tipping in Dictator and Ultimatum Games," Games and Economic Behavior, Elsevier, Elsevier, vol. 23(2), pages 247-265, May.
  9. Ofer H. Azar, 2003. "The Social Norm of Tipping: A Review," Others, EconWPA 0309006, EconWPA.
  10. Orn Bodvarsson & William Luksetich & Sherry McDermott, 2003. "Why do diners tip: rule-of-thumb or valuation of service?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(15), pages 1659-1665.
  11. Lynn, Michael & McCall, Michael, 2000. "Gratitude and gratuity: a meta-analysis of research on the service-tipping relationship," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 29(2), pages 203-214.
  12. Lynn, Michael & Grassman, Andrea, 1990. "Restaurant tipping: an examination of three 'rational' explanations," Journal of Economic Psychology, Elsevier, Elsevier, vol. 11(2), pages 169-181, June.
  13. Ofer Azar, 2005. "Who do we tip and why? An empirical investigation," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(16), pages 1871-1879.
  14. Donna Brown & Steven McIntosh, 2003. "Job satisfaction in the low wage service sector," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(10), pages 1241-1254.
  15. Ofer H. Azar, 2005. "Why pay extra? Tipping and the importance of social norms and feelings in economic theory," Microeconomics, EconWPA 0503005, EconWPA.
  16. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(3), pages 715-753, August.
  17. Lynn, Michael & Zinkhan, George M & Harris, Judy, 1993. " Consumer Tipping: A Cross-Country Study," Journal of Consumer Research, University of Chicago Press, University of Chicago Press, vol. 20(3), pages 478-88, December.
  18. Azar, Ofer H., 2009. "Tipping motivations and behavior in the US and Israel," MPRA Paper 20304, University Library of Munich, Germany.
  19. Loewenstein, George, 1999. "Because It Is There: The Challenge of Mountaineering . . . for Utility Theory," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 52(3), pages 315-43.
  20. Ofer H. Azar, 2003. "The implications of tipping for economics and management," Others, EconWPA 0309002, EconWPA.
  21. Ofer H. Azar, 2003. "Optimal Monitoring with External Incentives: The Case of Tipping," Industrial Organization, EconWPA 0312004, EconWPA.
  22. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
  23. Őrn Bodvarsson, 2005. "Restaurant tips and service quality: a reply to Lynn," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(6), pages 345-346.
  24. Wessels, Walter John, 1997. "Minimum Wages and Tipped Servers," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 35(2), pages 334-49, April.
  25. Bodvarsson, Orn B. & Gibson, William A., 1994. "Gratuities and customer appraisal of service: Evidence from Minesota restaurants," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 23(3), pages 287-302.
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 in new window

Cited by:
  1. Azar, Ofer H., 2011. "Business strategy and the social norm of tipping," Journal of Economic Psychology, Elsevier, Elsevier, vol. 32(3), pages 515-525, June.
  2. 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.
  3. Lynn, Michael & Wang, Shuo, 2013. "The indirect effects of tipping policies on patronage intentions through perceived expensiveness, fairness, and quality," Journal of Economic Psychology, Elsevier, Elsevier, vol. 39(C), pages 62-71.
  4. Azar, Ofer H., 2006. "Tipping, firm strategy, and industrial organization," MPRA Paper 4485, University Library of Munich, Germany.
  5. 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, Elsevier, vol. 33(1), pages 90-103.
  6. Saunders, Stephen G. & Lynn, Michael, 2010. "Why tip? An empirical test of motivations for tipping car guards," Journal of Economic Psychology, Elsevier, Elsevier, vol. 31(1), pages 106-113, February.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:4457. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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