IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v35y2003i15p1659-1665.html
   My bibliography  Save this article

Why do diners tip: rule-of-thumb or valuation of service?

Author

Listed:
  • Orn Bodvarsson
  • William Luksetich
  • Sherry McDermott

Abstract

When diners decide how much to tip, is the decision based on social convention or on conscientious appraisal of server productivity? Previous researchers in economics and social psychology are generally inconclusive on this question. A common finding in the literature is that tip size and service quality are unrelated, a result usually obtained from OLS regressions. OLS is only appropriate if service quality is exogenous. It is argued that service quality is very likely endogenous in any regression of tip size; good quality encourages good tips, but server expectations of good tips encourage good quality. This simultaneity is accounted for by jointly estimating percentage tips and customer rankings of service quality on a sample of 247 diners in a Central Minnesota restaurant. Included are explanatory variables consistent with both the social psychology and economic views of tipping. In contrast to previous studies, it is found that service quality significantly affects tip size and when servers expect higher tips, customers rank service quality higher. Also it is found that patronage frequency and coupon redemption have no effect on percentage tips, but server gender influences quality significantly. It is concluded that the results are generally supportive of an economic hypothesis of tipping.

Suggested Citation

  • Orn Bodvarsson & William Luksetich & Sherry McDermott, 2003. "Why do diners tip: rule-of-thumb or valuation of service?," Applied Economics, Taylor & Francis Journals, vol. 35(15), pages 1659-1665.
    • Handle: RePEc:taf:applec:v:35:y:2003:i:15:p:1659-1665
    DOI: 10.1080/0003684032000126799
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684032000126799
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/0003684032000126799?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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, vol. 23(3), pages 287-302.
    2. Frank, Robert H, 1987. "If Homo Economicus Could Choose His Own Utility Function, Would He Want One with a Conscience?," American Economic Review, American Economic Association, vol. 77(4), pages 593-604, September.
    3. Lynn, Michael & Grassman, Andrea, 1990. "Restaurant tipping: an examination of three 'rational' explanations," Journal of Economic Psychology, Elsevier, vol. 11(2), pages 169-181, June.
    4. 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.
    5. Lynn, Michael & Zinkhan, George M & Harris, Judy, 1993. "Consumer Tipping: A Cross-Country Study," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 20(3), pages 478-488, December.
    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


    Cited by:

    1. Peter Kerr & Bruce Domazlicky, 2009. "Tipping and service quality: results from a large database," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1505-1510.
    2. Azar, Ofer H., 2009. "Tipping motivations and behavior in the US and Israel," MPRA Paper 20304, University Library of Munich, Germany.
    3. Michael Lynn, 2004. "Restaurant tips and service quality: a commentary of Bodvarsson, Luksetich and McDermott (2003)," Applied Economics Letters, Taylor & Francis Journals, vol. 11(15), pages 975-978.
    4. Matt Parrett, 2006. "An Analysis of the Determinants of Tipping Behavior: A Laboratory Experiment and Evidence from Restaurant Tipping," Southern Economic Journal, John Wiley & Sons, vol. 73(2), pages 489-514, October.
    5. Melville Saayman & Andrea Saayman, 2015. "Understanding Tipping Behaviour — An Economic Perspective," Tourism Economics, , vol. 21(2), pages 247-265, April.
    6. 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.
    7. ChihChien Chen & YangSu Chen, 2017. "The impacts of different types of cuisines and restaurants on gratuities," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 16(2), pages 154-173, April.
    8. Elif Aydin, Asli & Acun, Yüksel, 2019. "An investigation of tipping behavior as a major component in service economy: The case of taxi tipping," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 78(C), pages 114-120.
    9. Saunders, Stephen G. & Lynn, Michael, 2010. "Why tip? An empirical test of motivations for tipping car guards," Journal of Economic Psychology, Elsevier, vol. 31(1), pages 106-113, February.
    10. Caitlin Knowles Myers & Marcus Bellows & Hiba Fakhoury & Douglas Hale & Alexander Hall & Kaitlin Ofman, 2010. "Ladies first? A field study of discrimination in coffee shops," Applied Economics, Taylor & Francis Journals, vol. 42(14), pages 1761-1769.
    11. Őrn Bodvarsson, 2005. "Restaurant tips and service quality: a reply to Lynn," Applied Economics Letters, Taylor & Francis Journals, vol. 12(6), pages 345-346.
    12. Lamar Pierce & Daniel C. Snow & Andrew McAfee, 2015. "Cleaning House: The Impact of Information Technology Monitoring on Employee Theft and Productivity," Management Science, INFORMS, vol. 61(10), pages 2299-2319, October.
    13. Azar, Ofer H., 2006. "Tipping, firm strategy, and industrial organization," MPRA Paper 4485, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    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. Lynn, Michael, 2015. "Service gratuities and tipping: A motivational framework," Journal of Economic Psychology, Elsevier, vol. 46(C), pages 74-88.
    3. Ofer H. Azar, 2003. "The Social Norm of Tipping: A Review," Others 0309006, University Library of Munich, Germany.
    4. 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.
    5. Lynn, Michael, 2015. "Explanations of service gratuities and tipping: Evidence from individual differences in tipping motivations and tendencies," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 55(C), pages 65-71.
    6. Azar, Ofer H., 2006. "Tipping, firm strategy, and industrial organization," MPRA Paper 4485, University Library of Munich, Germany.
    7. García-Almeida, Desiderio Juan & Klassen, Norbert, 2017. "The influence of knowledge-based factors on taxi competitiveness at island destinations: An analysis on tips," Tourism Management, Elsevier, vol. 59(C), pages 110-122.
    8. Azar, Ofer H., 2011. "Business strategy and the social norm of tipping," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 515-525, June.
    9. Azar, Ofer H., 2004. "The history of tipping--from sixteenth-century England to United States in the 1910s," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 33(6), pages 745-764, December.
    10. Ofer H. Azar, 2003. "The implications of tipping for economics and management," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 30(10), pages 1084-1094, October.
    11. Lee, Jeonggyu & Aggarwal, Anubhav & Rafieian, Hoori & Korschun, Daniel, 2020. "Do consumers use tipping to monitor service? Role of power and embarrassment," Journal of Retailing and Consumer Services, Elsevier, vol. 56(C).
    12. Tin-Chun Lin, 2007. "Economic Behavior of Restaurant Tipping," Economics Bulletin, AccessEcon, vol. 4(2), pages 1-10.
    13. 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.
    14. Matt Parrett, 2006. "An Analysis of the Determinants of Tipping Behavior: A Laboratory Experiment and Evidence from Restaurant Tipping," Southern Economic Journal, John Wiley & Sons, vol. 73(2), pages 489-514, October.
    15. Ofer Azar, 2005. "Who do we tip and why? An empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 37(16), pages 1871-1879.
    16. 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.
    17. Kang, Christine & Wooten, David B., 2020. "The Presenter’s Paradox in customer service interactions," Journal of Business Research, Elsevier, vol. 120(C), pages 94-102.
    18. Berry, Christopher & Douglas Hoffman, K., 2023. "Communicating intent: Effects of employer-controlled tipping strategy disclosures on tip amount and firm evaluations," Journal of Business Research, Elsevier, vol. 160(C).
    19. Conlin, Michael & Lynn, Michael & O'Donoghue, Ted, 2003. "The norm of restaurant tipping," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 297-321, November.
    20. R. Keith Schwer & Rennae Daneshvary, 2000. "Tipping participation and expenditures in beauty salons," Applied Economics, Taylor & Francis Journals, vol. 32(15), pages 2023-2031.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:35:y:2003:i:15:p:1659-1665. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.