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Tipping: The Economics of a Social Norm


  • Ofer H. Azar

    (Northwestern University)


Tipping illustrates the importance of social norms in motivating economic behavior. People tip because this is the social norm and disobeying norms results in social disapproval that creates emotional disutility. Tipping is also economically important: in the United States alone, millions of workers derive most of their income from tips, and annual tips amount to dozens of billions of dollars. I claim that tipping is not a single phenomenon; the economics of some tipping occasions is very different from that of others. I divide tipping to six different categories: reward-tipping, price-tipping, tipping-in advance, bribery-tipping, holiday-tipping and gift-tipping, and discuss the economics of each category. The analysis suggests that in many cases the social norm of tipping has economic justification, because it solves some inefficiency and increases welfare. In particular, tipping can promote good service where other mechanisms fail to do so. This suggests that the relationship between economics and social norms is indeed complex; not only social norms motivate economic behavior, but also economic reasons may promote the establishment of certain social norms, as Arrow (1971) argued.

Suggested Citation

  • Ofer H. Azar, 2003. "Tipping: The Economics of a Social Norm," Labor and Demography 0309002, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0309002
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    References listed on IDEAS

    1. 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.
    2. Wessels, Walter John, 1997. "Minimum Wages and Tipped Servers," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 334-349, April.
    3. Lynn, Michael & Zinkhan, George M & Harris, Judy, 1993. " Consumer Tipping: A Cross-Country Study," Journal of Consumer Research, Oxford University Press, vol. 20(3), pages 478-488, December.
    4. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    5. 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, vol. 29(2), pages 203-214.
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    Cited by:

    1. Ofer H. Azar, 2003. "The implications of tipping for economics and management," Others 0309002, EconWPA.
    2. Ofer H. Azar, 2003. "The Social Norm of Tipping: A Review," Others 0309006, EconWPA.

    More about this item


    Tipping; Social norms; Bribery;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • D10 - Microeconomics - - Household Behavior - - - General
    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General

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