EconPapers    
Economics at your fingertips  
 

Tipping as a Strategic Investment in Service Quality: An Optimal‐Control Analysis of Repeated Interactions in the Service Industry

Ofer Azar and Yossi Tobol

Southern Economic Journal, 2008, vol. 75, issue 1, 246-260

Abstract: We present an optimal‐control model in which tipping behavior creates a reputation that affects future service. Tipping and reputation can evolve in four path prototypes: converging to an interior equilibrium, converging to minimum tips and reputation, and two prototypes that start differently but end with tips and reputation increasing indefinitely. Analyzing the interior equilibrium indicates that when reputation erodes more quickly (capturing lower patronage frequency), equilibrium reputation is lower. Interestingly, however, tips may be higher. Increasing the minimal tip raises tips by the same increase and does not change reputation. A more patient customer leaves higher tips and reaches a higher reputation.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/j.2325-8012.2008.tb00902.x

Related works:
Working Paper: Tipping as a strategic investment in service quality: An optimal-control analysis of repeated interactions in the service industry (2007) Downloads
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:wly:soecon:v:75:y:2008:i:1:p:246-260

Access Statistics for this article

More articles in Southern Economic Journal from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-22
Handle: RePEc:wly:soecon:v:75:y:2008:i:1:p:246-260