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Who Do We Tip and Why? An Empirical Investigation

Ofer Azar ()

Labor and Demography from University Library of Munich, Germany

Abstract: An important question about social norms is whether they are created to increase welfare; I address it by examining the characteristics of tipped and non-tipped occupations. Tipping prevalence is negatively correlated with worker’s income and consumer’s monitoring ability and positively with consumer’s income and closeness between the worker and the consumer. The results refute a common belief that tipping exists to improve economic efficiency by lowering monitoring costs. Tipping, however, is more prevalent when consumers feel empathy and compassion for workers and want to show gratitude for good service, suggesting that tipping might increase welfare if welfare includes psychological utility.

Keywords: Tipping; Service industries; social norms; social welfare; behavioral economics; feelings; emotions (search for similar items in EconPapers)
JEL-codes: C9 A12 J3 L8 D0 (search for similar items in EconPapers)
Date: 2005-02-20
Note: Type of Document - pdf; pages: 20
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Handle: RePEc:wpa:wuwpla:0502005