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Who do we tip and why? An empirical investigation

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Abstract:

An important question about social norms is whether they are created to increase welfare. This is addressed 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.

Document Type: Research Article

DOI: https://doi.org/10.1080/00036840500119018

Affiliations: Department of Business Administration, School of Management, Ben-Gurion University of the Negev, P.O.B. 653, Beer Sheva 84105, Israel, Email: azar@som.bgu.ac.il

Publication date: 2005-09-10

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