Passenger Group Size and Tipping: An Empirical Study of 50 Million NYC Yellow Taxi Rides

Abstract

Limited research has explored the effect of customer group size on service quality sensitivity. To fill this gap, this study utilizes a dataset comprising approximately 50 million yellow taxi rides in New York City to investigate the connection between passenger group size and tipping rate. The authors posit that consumers are fair-minded and motivated to tip in such a manner that perceived equity can be maintained in the exchange with a service provider. Based on such a premise, they hypothesize that i) service quality has a positive effect on tip amount; ii) the positive effect of service quality on tip amount is greater for larger customer groups, who tend to gain more in collective benefit from higher service quality; and iii) customers tip more when service providers encounter more adverse external conditions in service delivery. Consistent with their hypotheses, the authors find that a) as trip duration increases (a surrogate for lower service quality), tips decrease, and the decrease is more pronounced for larger passenger groups; b) for trips completed under less favorable traffic or weather conditions, passengers tip more. These findings should prove relevant to firms whose services are experienced by customers in groups of different sizes.

Keywords: service quality, group size, tipping, fair-mindedness, equity theory, conditions of service fulfillment