Tipping Motivations and Behavior in the U.S. and Israel

Azar, Ofer H.

doi:10.1111/j.1559-1816.2009.00581.x

Cited by 57 publications

(83 citation statements)

References 44 publications

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“…Because the service has already been provided by the time the tip is given, the service provider can no longer change the service in response to the tip. Empirical studies, however, show that almost all people tip where this is a social norm (Azar, 2006b). Consequently, tipping is an example that illustrates the importance of social norms and psychological motivations in economic behavior (Azar, 2007a).…”

Section: Introductionmentioning

confidence: 99%

Incentives and service quality in the restaurant industry: the tipping–service puzzle

Azar

2009

Applied Economics

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Tipping is a significant economic activity (tips in the US food industry alone amount to about $42 billion annually) that was claimed to improve service quality and increase economic efficiency, because it gives incentives to provide excellent service, and therefore allows to avoid costly monitoring of workers. The article suggests that this common wisdom might be wrong. A simple model shows formally that tips can improve service only if they are sensitive enough to service quality. Empirical evidence suggests that tips are hardly affected by service quality. Nevertheless, rankings of service quality by customers are very high; the co-existence of these two findings is denoted "the tipping -service puzzle," and several possible explanations for it are offered. Keywords: tipping, service quality, social norms, waiters, restaurants, the hospitality industry.

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Section: Introductionmentioning

confidence: 99%

Incentives and service quality in the restaurant industry: the tipping–service puzzle

Azar

2009

Applied Economics

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“…This result is rather surprising-all previous studies found either no relationship or a positive relationship (which would be in line with the economic theory). One explanation of this striking result may be that in fact there is no relationship between the patronage frequency and the gratuity size, and the relationship found in some previous studies is a result of a missing covariate, see Azar (2010a). Thus regular patrons tip more or less than the occasional customers because they belong to a different social group, not because of any strategic reasons.…”

Section: Figure 1 Empirical Distribution Of Gratuity In the Data Samplementioning

confidence: 86%

“…The tipping norms are slightly lower both in Canada, see e.g. Bodvarsson and Gibson (1999), and in Israel, see Azar (2010a).…”

Section: Literature Reviewmentioning

confidence: 98%

“…On the other hand, Bodvarsson and Gibson (1997) found the relationship statistically significant only in two of seven restaurants, and even there it was small. Hypothetical surveys found no relationship between patronage frequency and the gratuity size (Kahneman, Knetsch, andThaler, 1986, andAzar, 2010a). A possible explanation is that the patronage frequency does not significantly affect the tipping behavior but serves as a proxy for a missing variable, most likely for the unobserved income which is correlated with the gratuity size (Azar 2010a).…”

Section: Literature Reviewmentioning

confidence: 98%

“…Hypothetical surveys found no relationship between patronage frequency and the gratuity size (Kahneman, Knetsch, andThaler, 1986, andAzar, 2010a). A possible explanation is that the patronage frequency does not significantly affect the tipping behavior but serves as a proxy for a missing variable, most likely for the unobserved income which is correlated with the gratuity size (Azar 2010a). Nonetheless, Lynn (2006) thinks the relationship is genuine.…”

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Determinants of Gratuity Size in the Czech Republic: Evidence from Four Inexpensive Restaurants in Brno

Kvasnička¹,

Szalaiová

2015

Review of Economic Perspectives

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Abstract:The paper presents the results of the first study exploring what factors influence tipping in restaurants in the Czech Republic. It shows that the tipping norm evolved here into a form that has some features similar to the tipping norms known in the USA, Canada, and Israel, but there are also striking differences. As in the three countries, the gratuity increases with the bill size but the gratuity as percentage of the bill is much lower here. The bill size explains here a lower part of the gratuity variability too. Also, the service quality results in customers being more generous with their tips, and though the increase in gratuity seems to be small, it rises with a group size. Strikingly, the regular patrons tip significantly less in the Czech Republic and they stiff more often. This supports the hypothesis that the relationship between the customer frequency and the gratuity size is an artifact of a missing variable, and the regular patrons tip differently because they belong to a different social group than occasional customers. Also, the customers paying by card stiff more often here and the interaction between the amount on the bill and use of payment card is statistically insignificant. The group size lowers the percentage gratuity, which supports the diffusion of the responsibility hypothesis. There are differences between genders: Male customers leave bigger tips than female customers, and female waitresses earn more than their male colleagues. The time spent at the table, consumption of alcoholic beverage, and smoking do not change the gratuity size but it may be affected by the weather conditions. The customers tip less and stiff more often when they order a lunch special. They round the total expenditures, not the gratuities, which creates the magnitude effect.

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

Azar

Tobol

2008

Southern Economic Journal

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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.

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Tipping Motivations and Behavior in the U.S. and Israel

Cited by 57 publications

References 44 publications

Incentives and service quality in the restaurant industry: the tipping–service puzzle

Incentives and service quality in the restaurant industry: the tipping–service puzzle

Determinants of Gratuity Size in the Czech Republic: Evidence from Four Inexpensive Restaurants in Brno

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

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