The Economics of Tipping: Tips, Profits and the Market's Demand—Supply Equilibrium

Zvi Schwartz
Additional contact information
Zvi Schwartz: TechnoLodge, 16500 Lancaster Estates Drive, Wildwood, MO 63040, USA

Tourism Economics, 1997, vol. 3, issue 3, 265-279

Abstract: Research indicates that the size of a tip is rarely correlated with the quality of the service rendered. These findings empirically refute the widely accepted economic argument that tipping is an efficient quality-control mechanism. This study provides an alternative explanation to the existence of tipping. It develops a microeconomics tipping model and demonstrates that tips affect the firm's profitability through changes in the market's demand–supply equilibrium when consumer segments differ in their demand functions and their propensity to tip. This demand–supply framework can serve as a useful tool for managers who wish to select an appropriate tipping policy for their firms.

Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/135481669700300305 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:3:y:1997:i:3:p:265-279

DOI: 10.1177/135481669700300305

Access Statistics for this article

More articles in Tourism Economics
Bibliographic data for series maintained by SAGE Publications (sagediscovery@sagepub.com).