Business strategy and the social norm of tipping

Ofer Azar

Journal of Economic Psychology, 2011, vol. 32, issue 3, 515-525

Abstract: Tipping is an important economic phenomenon, involving about $47Â billion a year in the US food industry alone, and trillions of dollars across different occupations and countries over the years. Moreover, tipping is a major source of income for millions of workers. This article discusses the implications of tipping for business strategy in the relevant industries. For example, firms can choose to impose a compulsory service charge in lieu of tipping - what are the advantages and disadvantages of doing so? How does tipping change the profit-maximizing level of investing in screening job applicants, training workers, monitoring them, and providing performance-based incentives by the firm? Can industries such as the music industry use tips (i.e., prices being voluntary and determined by the customers) as an alternative business model?

Keywords: Tipping; Social; norms; Business; strategy; Service; industry; Restaurant; industry (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:32:y:2011:i:3:p:515-525

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