Do People Tip Strategically, to Improve Future Service? Theory and Evidence

13 Pages Posted: 19 May 2007

See all articles by Ofer H. Azar

Ofer H. Azar

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

Abstract

A central question about tipping is whether people tip strategically, to improve future service, or only because tipping is a social norm. I present a theoretical model that incorporates psychological utility associated with tipping (because it is a social norm) and allows tipping to be motivated also by future service considerations. The model predicts that if future service is a reason for tipping, the sensitivity of tips to service quality should be higher for repeating customers than for non-repeating ones. Surveys of 597 restaurant customers are analysed and suggest that future service is not a reason for tipping.

Suggested Citation

Azar, Ofer H., Do People Tip Strategically, to Improve Future Service? Theory and Evidence. Canadian Journal of Economics, Vol. 40, No. 2, pp. 515-527, May 2007. Available at SSRN: https://ssrn.com/abstract=986758 or http://dx.doi.org/10.1111/j.1365-2966.2007.00419.x

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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