Who Do We Tip and Why? An Empirical Investigation

22 Pages Posted: 21 Feb 2005

See all articles by Ofer H. Azar

Ofer H. Azar

Ben-Gurion University of the Negev - Guilford Glazer Faculty of Business and Management

Abstract

An important question about social norms is whether they are created to increase welfare; I address it by examining the characteristics of tipped and non-tipped occupations. Tipping prevalence is negatively correlated with worker's income and consumer's monitoring ability and positively with consumer's income and closeness between the worker and the consumer. The results refute a common belief that tipping exists to improve economic efficiency by lowering monitoring costs. Tipping, however, is more prevalent when consumers feel empathy and compassion for workers and want to show gratitude for good service, suggesting that tipping might increase welfare if welfare includes psychological utility.

Keywords: Tipping, Service industries, social norms, social welfare, behavioral economics, feelings, emotions, psychological economics

JEL Classification: C9, Z13, A12, J3, L8, D0

Suggested Citation

Azar, Ofer H., Who Do We Tip and Why? An Empirical Investigation. Applied Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=669981

Ofer H. Azar (Contact Author)

Ben-Gurion University of the Negev - Guilford Glazer Faculty of Business and Management ( email )

P.O. Box 653
Beer-Sheva, 84105
Israel
+972 8 6472675 (Phone)
+972 8 6477691 (Fax)

HOME PAGE: http://www.oferazar.com

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