Do people tip strategically, to improve future service? Theory and evidence

Ofer Azar

Canadian Journal of Economics, 2007, vol. 40, issue 2, 515-527

Abstract: A central question about tipping is whether people tip strategically, to improve future service, or only because tipping is a social norm. I present a theoretical model that incorporates psychological utility associated with tipping (because it is a social norm) and allows tipping to be motivated also by future service considerations. The model predicts that if future service is a reason for tipping, the sensitivity of tips to service quality should be higher for repeating customers than for non-repeating ones. Surveys of 597 restaurant customers are analysed and suggest that future service is not a reason for tipping.

JEL-codes: D10 L83 (search for similar items in EconPapers)
Date: 2007
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