Tip Suggestions and Service Efficiency

68 Pages Posted: 19 Jan 2024

See all articles by Guangli Zhang

Guangli Zhang

Washington University in St. Louis; Saint Louis University - Sinquefield Center for Applied Economic Research

Jeffrey Cross

Hamilton College - Economics Department

Multiple version iconThere are 2 versions of this paper

Abstract

That customers respond to tip suggestions is well-documented, but less is known about how changing tip suggestions impacts service quality. Leveraging the unique setting of New York City taxicabs, we document that increasing tip suggestions improves driver efficiency (e.g., shorter distance) only when total fares are fixed. This response seems to be driven by drivers prioritizing faster turnarounds rather than aiming for higher tip rates. This study offers new evidence that altering tip suggestions can influence service efficiency on the supply side, although the effect may vary depending on market conditions, including pricing mechanisms and the cost of slower service.

Keywords: Tips, Suggestions, Taxi, Service Efficiency

Suggested Citation

Zhang, Guangli and Cross, Jeffrey, Tip Suggestions and Service Efficiency. Available at SSRN: https://ssrn.com/abstract=4700401 or http://dx.doi.org/10.2139/ssrn.4700401

Guangli Zhang

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Saint Louis University - Sinquefield Center for Applied Economic Research ( email )

3700 West Pine Mall Blvd. Fusz Hall, 358
St. Louis, MO 63103
United States

Jeffrey Cross (Contact Author)

Hamilton College - Economics Department ( email )

198 College Hill Road
Clinton, NY 13323
United States

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