Tuesday, September 17, 2002


This week on Monday Economics with Geraldine Doogue I discussed the economics of tipping. Pure economic theory would suggest that we should not. We try to get the best possible price for things. So why pay more, and why do it after the service has been rendered? Especially if you are not likely to ever go to that town or restaurant again?

The Research at Cornell University suggests that we do it in large measure to ensure good service. Tipping is a sort of shadow market which fulfils a role legal contracts cannot. These days there is such a contract for employment. I will work more than the strict number of hours required, and in return you will pay me more than you are legally required to, and keep me on in a downturn.

We also do it for status. Ray Williams of HIH did it a lot. Men do it much more than women.

We are more likely to tip when other people are watching (say, in a big group).

And women are significantly more likely to do it when their waiter is a man, especially a man of eligible age.

For men, apparently, there is no such effect.

Some of the references are here.