Why Do We Tip Taxicab Drivers?
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.
|Date of creation:||May 2009|
|Contact details of provider:|| Postal: 6-1 Mihogaoka, Ibaraki, Osaka 567-0047|
Web page: http://www.iser.osaka-u.ac.jp/index-e.html
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- Mohring, Herbert, 1972. "Optimization and Scale Economies in Urban Bus Transportation," American Economic Review, American Economic Association, vol. 62(4), pages 591-604, September.
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"What sustains social norms and how they evolve?: The case of tipping,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 54(1), pages 49-64, May.
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- Arnott, Richard, 1996. "Taxi Travel Should Be Subsidized," Journal of Urban Economics, Elsevier, vol. 40(3), pages 316-333, November. Full references (including those not matched with items on IDEAS)
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