An economic approach to tips and service quality: Results of a survey

Bodvarsson, Örn B.

doi:10.1016/s0362-3319(99)80009-3

Cited by 55 publications

(57 citation statements)

References 2 publications

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“…The disadvantage of hypothetical surveys compared to empirical surveys is that it is not entirely obvious that people indeed tip in the manner they respond when asked about it hypothetically. A couple of examples for hypothetical surveys are Bodvarsson and Gibson (1999) and Azar (2006b).…”

Section: Literature Reviewmentioning

confidence: 99%

Incentives and service quality in the restaurant industry: the tipping–service puzzle

Azar

2009

Applied Economics

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Tipping is a significant economic activity (tips in the US food industry alone amount to about $42 billion annually) that was claimed to improve service quality and increase economic efficiency, because it gives incentives to provide excellent service, and therefore allows to avoid costly monitoring of workers. The article suggests that this common wisdom might be wrong. A simple model shows formally that tips can improve service only if they are sensitive enough to service quality. Empirical evidence suggests that tips are hardly affected by service quality. Nevertheless, rankings of service quality by customers are very high; the co-existence of these two findings is denoted "the tipping -service puzzle," and several possible explanations for it are offered. Keywords: tipping, service quality, social norms, waiters, restaurants, the hospitality industry.

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Section: Literature Reviewmentioning

confidence: 99%

Incentives and service quality in the restaurant industry: the tipping–service puzzle

Azar

2009

Applied Economics

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“…The tipping norms are slightly lower both in Canada, see e.g. Bodvarsson and Gibson (1999), and in Israel, see Azar (2010a).…”

Section: Literature Reviewmentioning

confidence: 98%

“…Empirical results are mixed again. The hypothetical surveys found out that customers indeed tip significantly more for a better service-the regression parameters were statistically significant and the difference in the dollar tips was economically significant and able to motivate the waiting staff to provide a good service, see Bodvarsson and Gibson (1999) and Azar (2010b). However, the exit surveys found a very weak or non-existent relationship between the service quality and the gratuity size.…”

Section: Literature Reviewmentioning

confidence: 99%

Determinants of Gratuity Size in the Czech Republic: Evidence from Four Inexpensive Restaurants in Brno

Kvasnička¹,

Szalaiová

2015

Review of Economic Perspectives

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Abstract:The paper presents the results of the first study exploring what factors influence tipping in restaurants in the Czech Republic. It shows that the tipping norm evolved here into a form that has some features similar to the tipping norms known in the USA, Canada, and Israel, but there are also striking differences. As in the three countries, the gratuity increases with the bill size but the gratuity as percentage of the bill is much lower here. The bill size explains here a lower part of the gratuity variability too. Also, the service quality results in customers being more generous with their tips, and though the increase in gratuity seems to be small, it rises with a group size. Strikingly, the regular patrons tip significantly less in the Czech Republic and they stiff more often. This supports the hypothesis that the relationship between the customer frequency and the gratuity size is an artifact of a missing variable, and the regular patrons tip differently because they belong to a different social group than occasional customers. Also, the customers paying by card stiff more often here and the interaction between the amount on the bill and use of payment card is statistically insignificant. The group size lowers the percentage gratuity, which supports the diffusion of the responsibility hypothesis. There are differences between genders: Male customers leave bigger tips than female customers, and female waitresses earn more than their male colleagues. The time spent at the table, consumption of alcoholic beverage, and smoking do not change the gratuity size but it may be affected by the weather conditions. The customers tip less and stiff more often when they order a lunch special. They round the total expenditures, not the gratuities, which creates the magnitude effect.

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“…Other study types include the use of hypothetical questions about how much one would tip in certain circumstances (e.g., Bodvarsson and Gibson, 1999;Azar, 2006), lab experiments that mimic tipping situations (Ruffle, 1998;Parrett, 2003), the comparison of tipping practices across occupations (Azar, 2005b), historical examination of tipping practices (Azar, 2004b), and metaanalysis of the results in previous studies (Lynn and McCall, 2000a Lynn (2006), and Azar (2007c). No article, however, has offered an extensive literature review that focuses on the area of "tipping, firm strategy, and industrial organization."…”

mentioning

confidence: 99%

“…Bodvarsson and Gibson (1999), for example, conducted interviews with 21 students in two universities. 10 In St.…”

mentioning

confidence: 99%

Tipping, Firm Strategy, and Industrial Organization

Azar

2006

SSRN Journal

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Tipping is a phenomenon that has been studied for many years, but is receiving increased attention in recent years. The magnitude of tips is very large -in the US, for example, tips in the food industry alone amount to about $42 billion each year, and tips are given in many other establishments and countries, so annual worldwide tips are much higher than that. Millions of workers in the US alone derive most of their income from tips and tipping is prevalent in numerous countries and occupations. These are all good reasons to study tipping, but it is clear that tipping has created much interest also because it is puzzling from a theoretical perspective.The common assumption in economics that people maximize utility (which is derived by consuming various goods) subject to a budget constraint implies that people should give up money only when they receive something in return. This is not the case, however, when people 2 tip: service has already been provided by the time the tip is given, so the tip is a voluntary payment that does not buy something real (such as improved service) in return.The literature on tipping can be divided to two main areas. The first area can be termed "understanding tipping behavior." This includes studies that try to understand why people tip, what affects their tipping behavior, why tipping is different across countries, etc. The second research area, which started to receive attention more recently, can be defined as "tipping, firm strategy, and industrial organization." This part of the literature deals with the effect of tipping on firms and markets. For example, firms can sometimes choose between voluntary tipping and compulsory service charges -which one is better for the firm? How should the existence of tips affect optimal pricing by the firm? How should firms monitor workers and provide incentives to them when tipping exists? Why does tipping exist in some industries but not in others? Does tipping increase social welfare in industries in which it is the norm? All these questions belong to this second research area and demonstrate the close relationship of tipping to industrial organization and firm strategy. Several review articles made an attempt to summarize and synthesize the extensive literature in the area of understanding tipping behavior, but no article has offered an extensive literature review that focuses on the area of "tipping, firm strategy, and industrial organization." The purpose of this paper, therefore, is to review and summarize the literature in this area of research.

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An economic approach to tips and service quality: Results of a survey

Cited by 55 publications

References 2 publications

Incentives and service quality in the restaurant industry: the tipping–service puzzle

Incentives and service quality in the restaurant industry: the tipping–service puzzle

Determinants of Gratuity Size in the Czech Republic: Evidence from Four Inexpensive Restaurants in Brno

Tipping, Firm Strategy, and Industrial Organization

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