References (13)



Why Do We Tip Taxicab Drivers?

David Flath

Ritsumeikan University - Faculty of Economics

May 13, 2009

ISER Discussion Paper No. 738

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.

Number of Pages in PDF File: 11

Keywords: tipping, taxicabs, Lindahl pricing, social norms

JEL Classification: D40, D82

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Date posted: May 21, 2009  

Suggested Citation

Flath, David, Why Do We Tip Taxicab Drivers? (May 13, 2009). ISER Discussion Paper No. 738. Available at SSRN: https://ssrn.com/abstract=1403812 or http://dx.doi.org/10.2139/ssrn.1403812

Contact Information

David J. Flath (Contact Author)
Ritsumeikan University - Faculty of Economics ( email )
1-1-1 Noji-Higashi
Kusatsu, Shiga 525-8577, Siga 525-8577
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References:  13