are not given until after services have been rendered, they are not necessary to get good service in establishments that are infrequently patronized. For this reason, many economists regard tipping as “mysterious” or “seemingly irrational” behavior (e.g., BenZion and Karni, 1977; Frank, 1987; Landsburg, 1993). The present chapter explores this behavior and its implications for economic theory and public policy. The chapter is divided into four sections. The first two sections provide more detail about the phenomenon of tipping by summarizing and discussing the results of empirical research on the determinants and predictors of restaurant tipping and of national differences in tipping customs respectively. Then, economic theories about tipping are reviewed in light of the previously summarized empirical literature. Finally, the public welfare and policy issues raised by tipping are discussed.
Determinants and Predictors of Restaurant Tipping Restaurant tips in the United States vary substantially across dining occasions, dining parties, servers, and restaurants. Numerous studies attempting to explain this variability in restaurant tipping have appeared in the psychology and hospitality management literatures and a few such studies are beginning to appear in the economics literature (e.g., Bodvarsson and Gibson, 1994; Bodvarsson, Luksetich and Mcdermott, 2003; Conlin, Lynn and O’Donahue, 2003; Lynn and McCall, 2000a; McCrohan and Pearl, 1991). This research has generally relied upon one or more of the following three methodologies: (1) researchers have stood outside of restaurants and conducted exit surveys of departing patrons about their just completed service encounters and tipping
behaviors, (2) researchers have created panels of consumers who agreed to keep diaries of their restaurant dining experiences and tipping behavior, and (3) researchers have recruited restaurant servers to record information about their own behavior, their customers’ characteristics, and the tips those customers leave. Among the variables whose effects on restaurant tipping have been studied using these methodologies are bill size, payment method, dining party size, service quality, server friendliness,...