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The implications of tipping for economics and management

  • Ofer H. Azar

    (Northwestern University)

Tipping is a phenomenon that illustrates the importance of social norms and psychological reasons in motivating economic behavior. People tip because this is the social norm and disobeying norms results in psychological 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. Tipping is also prevalent in numerous other countries around the globe. While tipping has been studied extensively by psychologists, it received very little attention from economists. To encourage other economists to research this interesting phenomenon, I discuss the implications of tipping for several areas in economics: social economics, behavioral economics, labor economics, and economics of information / management strategy. I provide many ideas for future research both as part of the discussion and in a concluding section.

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Paper provided by EconWPA in its series Others with number 0309002.

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Date of creation: 02 Sep 2003
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Handle: RePEc:wpa:wuwpot:0309002
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  1. Azar, Ofer H., 2007. "Why pay extra? Tipping and the importance of social norms and feelings in economic theory," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(2), pages 250-265, April.
  2. 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.
  3. 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.
  4. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
  5. Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers 97-251, University of California at Berkeley.
  6. Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
  7. Ofer H. Azar, 2003. "Tipping: The Economics of a Social Norm," Labor and Demography 0309002, EconWPA.
  8. Lynn, Michael & Zinkhan, George M & Harris, Judy, 1993. " Consumer Tipping: A Cross-Country Study," Journal of Consumer Research, University of Chicago Press, vol. 20(3), pages 478-88, December.
  9. 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.
  10. Richard H. Thaler, 2000. "From Homo Economicus to Homo Sapiens," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 133-141, Winter.
  11. Loewenstein, George, 1999. "Because It Is There: The Challenge of Mountaineering . . . for Utility Theory," Kyklos, Wiley Blackwell, vol. 52(3), pages 315-43.
  12. 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.
  13. repec:tpr:qjecon:v:115:y:2000:i:3:p:715-753 is not listed on IDEAS
  14. 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.
  15. Wessels, Walter John, 1997. "Minimum Wages and Tipped Servers," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 334-49, April.
  16. Ofer H. Azar, 2003. "The Social Norm of Tipping: A Review," Others 0309006, EconWPA.
  17. Sugden, Robert, 1989. "Spontaneous Order," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 85-97, Fall.
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