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The Social Norm of Tipping: Does it Improve Social Welfare? Author info | Abstract | Publisher info | Download info | Related research | Statistics Ofer H. Azar (Ben-Gurion University of the Negev)
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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.
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Paper provided by EconWPA in its series Others with number
0503013.
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Length: 40 pages
Date of creation: 29 Mar 2005Date of revision:
Handle: RePEc:wpa:wuwpot:0503013Note: Type of Document - pdf; pages: 40Contact details of provider: Web page: http://129.3.20.41
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Keywords: Tipping ; Social norms ; Social welfare ; Behavioral economics ; Psychology and economics ; psychological economics ; Other versions of this item:
Find related papers by JEL classification: J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
This paper has been announced in the following NEP Reports :
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.: Ernst Fehr & Simon Gaechter, .
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Conlin, Michael & Lynn, Michael & O'Donoghue, Ted, 2003.
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Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986.
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American Economic Review ,
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Ofer H. Azar, 2005.
"Why pay extra? Tipping and the importance of social norms and feelings in economic theory ,"
Microeconomics
0503005, EconWPA.
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Other versions: Azar, Ofer H., 2004.
"What sustains social norms and how they evolve?: The case of tipping ,"
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"More Is Better, But Fair Is Fair: Tipping in Dictator and Ultimatum Games ,"
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Full
references Cited by : (explanations , 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.)
Ofer Azar, 2008.
"Strategic Behavior and Social Norms in Tipped Service Industries ,"
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[Downloadable!] (restricted)
Ofer H. Azar, 2003.
"The Social Norm of Tipping: A Review ,"
Others
0309006, EconWPA.
[Downloadable!]
Ofer H. Azar, 2005.
"Why pay extra? Tipping and the importance of social norms and feelings in economic theory ,"
Microeconomics
0503005, EconWPA.
[Downloadable!]
Other versions: 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.
[Downloadable!]
Other versions: Azar, Ofer H., 2006.
"Tipping, firm strategy, and industrial organization ,"
MPRA Paper
4485, University Library of Munich, Germany.
[Downloadable!]
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.
[Downloadable!]
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