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Who Do We Tip and Why? An Empirical Investigation

  • Ofer H. Azar

    (Ben-Gurion University of the Negev)

An important question about social norms is whether they are created to increase welfare; I address it by examining the characteristics of tipped and non-tipped occupations. Tipping prevalence is negatively correlated with worker’s income and consumer’s monitoring ability and positively with consumer’s income and closeness between the worker and the consumer. The results refute a common belief that tipping exists to improve economic efficiency by lowering monitoring costs. Tipping, however, is more prevalent when consumers feel empathy and compassion for workers and want to show gratitude for good service, suggesting that tipping might increase welfare if welfare includes psychological utility.

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File URL: http://128.118.178.162/eps/lab/papers/0502/0502005.pdf
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Paper provided by EconWPA in its series Labor and Demography with number 0502005.

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Length: 20 pages
Date of creation: 20 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0502005
Note: Type of Document - pdf; pages: 20
Contact details of provider: Web page: http://128.118.178.162

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  1. Ofer H. Azar, 2003. "What sustains social norms and how they evolve? The case of tipping," Others 0309001, EconWPA.
  2. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
  3. Ofer H. Azar, 2003. "Optimal Monitoring with External Incentives: The Case of Tipping," Industrial Organization 0312004, EconWPA.
  4. Loewenstein, George, 1999. "Because It Is There: The Challenge of Mountaineering . . . for Utility Theory," Kyklos, Wiley Blackwell, vol. 52(3), pages 315-43.
  5. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
  6. 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.
  7. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  8. Wessels, Walter John, 1997. "Minimum Wages and Tipped Servers," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 334-49, April.
  9. 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 476-78, June.
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