Tipping in America

Topics: Economics, Tax, Service Pages: 30 (9761 words) Published: May 11, 2013
Tipping in Restaurants and Around the Globe: An Interdisciplinary Review Michael Lynn Introduction On an average day, approximately ten percent of the U.S. population eats at sitdown/family restaurants. In an average month, approximately 58% do so (Media Dynamics, 2001). After completing their meals, almost all of these restaurant diners leave a voluntary gift of money (or tip) for the server who waited on them (Speer, 1997). These tips, which amount to approximately $21 billion a year, are an important source of income for the nation’s two million waiters and waitresses (Lynn, 2003b). In fact, tips sometimes represent 100 percent of waiters and waitresses take home pay, because tax withholding eats up all of their hourly wages (Mason, 2002). Of course, tipping is not confined to restaurant servers or to the United States. In the U.S., consumers also tip barbers, bartenders, beauticians, bellhops, casino croupiers, chambermaids, concierges, delivery persons, doormen, golf caddies, limousine drivers, maitre-d’s, masseuses, parking attendants, pool attendants, porters, restaurant musicians, washroom attendants, shoeshine boys, taxicab drivers, and tour guides among others (Star, 1988). Although not as common as in the U.S., tipping is also practiced in most countries around the world (Putzi, 2002). In fact, national differences in tipping are a source of uncertainty for many international travelers and local tipping practices are a topic covered in most travel guides. Tipping is an interesting economic behavior, not only because it is widespread and practically important, but also because it is an expense that consumers are free to avoid. Although called for by social norms, tips are not legally required. Furthermore, since tips

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,...
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