Why pay extra? Tipping and the importance of social norms and feelings in economic theory

Ofer Azar

Microeconomics from University Library of Munich, Germany

Abstract: Tipping is a multi-billion-dollar phenomenon that standard economic models find hard to explain. I discuss several aspects of tipping and divide tipping to six different categories: reward-tipping, price- tipping, tipping-in-advance, bribery-tipping, holiday-tipping and gift- tipping, and discuss the economics of each category. Often tipping has economic justification, because it solves some inefficiency and increases welfare. Analyzing the potential reasons for tipping illustrates the importance of social norms and feelings (e.g. embarrassment and unfairness felt when one does not tip) in motivating economic behavior. Retaliatory behavior that workers sometimes exhibit towards non-tipping patrons is then discussed, and ideas for future research are proposed.

Keywords: Tipping; Social norms; Feelings; Consumer behavior; Restaurants; behavioral economics (search for similar items in EconPapers)
JEL-codes: A12 D00 D10 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2005-03-08
Note: Type of Document - pdf; pages: 31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Why pay extra? Tipping and the importance of social norms and feelings in economic theory (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpmi:0503005

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