Do people tip because of psychological or strategic motivations? An empirical analysis of restaurant tipping

Abstract

One of the most interesting and central questions about tipping is why people tip. The two major potential reasons are strategic behaviour aimed to ensure good future service and social/psychological motivations. Data on tipping behaviour suggests that there is no positive effect of patronage frequency on the sensitivity of tips to service quality. This implies that people tip only because of social and psychological motivations, and not because of strategic reasons and future service considerations.

Acknowledgements

I thank Michael Lynn for the data and an anonymous referee for helpful comments.

Notes

¹ Additional discussion of their results appears in Lynn (2004) and Bodvarsson (2005).

² The focus here is on the reasons that individuals have to tip in situations where tipping is a social norm. A different question is what are the reasons that tipping becomes a social norm in certain occupations but not in others; this question is addressed by Azar (2005) and is beyond the scope of this article.

³ I discuss waiters and restaurants but the ideas can be applied to other tipped occupations as well.

⁴ An extensive literature review on tipping is beyond the scope of this article. The interested reader can find such reviews in Lynn and McCall (2000), Lynn (2006) and Azar (2007b, c).

⁵ Additional information about the dataset is provided by Conlin et al. (2003), who examined these data to address a different set of issues related to tipping behaviour.

⁶ I thank an anonymous referee for pointing this out.

⁷ Additional specifications of the threshold between repeating and non-repeating customers yielded qualitatively similar results.