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The indirect effects of tipping policies on patronage intentions through perceived expensiveness, fairness, and quality

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  • Lynn, Michael
  • Wang, Shuo

Abstract

Many service firms allow their employees to be directly compensated by customers via the institution of tipping despite the fact this practice exposes firms to substantial risks, such as collusion between employees and customers against the firm. This paper examines a potential reason businesses may accept these risks. Specifically, it reports on a study finding that voluntary tipping policies increase potential demand by reducing perceived expensiveness, increasing perceived tipping policy fairness, and increasing a-priori expectations of service quality.

Suggested Citation

  • 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, vol. 39(C), pages 62-71.
  • Handle: RePEc:eee:joepsy:v:39:y:2013:i:c:p:62-71
    DOI: 10.1016/j.joep.2013.07.003
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    References listed on IDEAS

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    1. 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.
    2. Anand, Paul, 2001. "Procedural fairness in economic and social choice: Evidence from a survey of voters," Journal of Economic Psychology, Elsevier, vol. 22(2), pages 247-270, April.
    3. Marco Bertini & Luc Wathieu, 2008. "Research Note—Attention Arousal Through Price Partitioning," Marketing Science, INFORMS, vol. 27(2), pages 236-246, 03-04.
    4. Ofer H. Azar, 2004. "Optimal Monitoring with External Incentives: The Case of Tipping," Southern Economic Journal, Southern Economic Association, vol. 71(1), pages 170-181, July.
    5. Yadav, Manjit S, 1994. " How Buyers Evaluate Product Bundles: A Model of Anchoring and Adjustment," Journal of Consumer Research, Oxford University Press, vol. 21(2), pages 342-353, September.
    6. Garbarino, Ellen C & Edell, Julie A, 1997. " Cognitive Effort, Affect, and Choice," Journal of Consumer Research, Oxford University Press, vol. 24(2), pages 147-158, September.
    7. Maxwell, Sarah, 2002. "Rule-based price fairness and its effect on willingness to purchase," Journal of Economic Psychology, Elsevier, vol. 23(2), pages 191-212, April.
    8. Jacob, Nancy L & Page, Alfred N, 1980. "Production, Information Costs, and Economic Organization: The Buyer Monitoring Case," American Economic Review, American Economic Association, vol. 70(3), pages 476-478, June.
    9. Martin, William C. & Ponder, Nicole & Lueg, Jason E., 2009. "Price fairness perceptions and customer loyalty in a retail context," Journal of Business Research, Elsevier, vol. 62(6), pages 588-593, June.
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    Citations

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    Cited by:

    1. 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.
    2. 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.
    3. repec:spr:rvmgts:v:11:y:2017:i:4:d:10.1007_s11846-016-0208-x is not listed on IDEAS

    More about this item

    Keywords

    M10; M50; D03; D10; L80; Z13; M52; 3000; 3920; 3900; Tipping; Employee compensation; Pricing; Consumer perceptions; Fairness;

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D10 - Microeconomics - - Household Behavior - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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