Why pay extra? Tipping and the importance of social norms and feelings in economic theory

Ofer H. Azar ()

Microeconomics from EconWPA

Abstract: Tipping is a multi-billion-dollar phenomenon that standard economic models find hard to explain. I discuss several aspects of tipping and 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. Often tipping has economic justification, because it solves some inefficiency and increases welfare. Analyzing the potential reasons for tipping illustrates the importance of social norms and feelings (e.g. embarrassment and unfairness felt when one does not tip) in motivating economic behavior. Retaliatory behavior that workers sometimes exhibit towards non-tipping patrons is then discussed, and ideas for future research are proposed.

Keywords: Tipping; Social norms; Feelings; Consumer behavior; Restaurants; behavioral economics (search for similar items in EconPapers)
JEL-codes: D10 A12 D00 (search for similar items in EconPapers)
Date: 2005-03-08
Note: Type of Document - pdf; pages: 31
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http://129.3.20.41/eps/mic/papers/0503/0503005.pdf (application/pdf)

Related works:
Journal Article: Why pay extra? Tipping and the importance of social norms and feelings in economic theory (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpmi:0503005

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