Why Do We Tip Taxicab Drivers?
David Flath ()
ISER Discussion Paper from Institute of Social and Economic Research, Osaka University
The leading economic explanation for tipping -that is, explanation why the practice is socially beneficial, not why individuals leave tips even though it is not narrowly advantageous to them- is that it confers an incentive to provide personal services. This fits many instances in which tipping is common but does not fit the taxicab business very well. I propose a novel explanation for tipping that does fit the taxi case. It is that tipping amounts to Lindahl pricing of the services of vacant cabs (essentially, reduced waiting time), a local public good for taxi customers.
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Journal Article: Why Do We Tip Taxicab Drivers? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0738
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