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Why Do We Tip Taxicab Drivers?

David Flath ()

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: 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.

Date: 2009-05
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https://www.iser.osaka-u.ac.jp/library/dp/2009/DP0738.pdf

Related works:
Journal Article: Why Do We Tip Taxicab Drivers? (2012) Downloads
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