Sunday, April 10, 2005

The Science and Economics of Tipping

Via Marginal Revolution Via Kevin Drum

Your Pound of Flesh, Sir

By Raj Persaud
Published: April 9 2005 03:00 | Last updated: April 9 2005 03:00

In restaurants in the US, customers pay out about $26bn in tips every year. And this is only one corner of the hospitality industry, where it is customary also to tip bartenders, bellboys, casino croupiers, chambermaids, doormen, parking valets, washroom attendants and others. But how do you know, in America or elsewhere, whether or when to tip?


Academics who study tipping have identified 33 jobs for which remuneration includes tips. Fittingly, arguably the world's leading authority on the psychology of tipping is himself a former bartender, bus boy and waiter. Michael Lynn is now professor of consumer behaviour at Cornell University in New York. He believes that tipping should be of interest to economists and psychologists, because it doesn't appear to make any economic sense, and may instead lie firmly in the realm of psychology. Few people aspire to pay more than is strictly necessary for goods and services, yet in tipping they do so, often quite voluntarily. So, what accounts for this largesse?

[snip]

Today, economists view tipping as anomalous behaviour that challenges fundamental assumptions about the rationality of economic man. This is because tipping after a service has been provided cannot affect the quality of the service.

This view is reinforced by research conducted by Professor Lynn. He has analysed data involving 2,547 dining parties at 20 restaurants, and established scientifically what many waiters have long suspected - that there is only a very weak relationship between the size of a tip and the quality of service provided. It therefore makes little sense for a waiter to work harder in order to obtain a tip.


[snip]

The economics of tipping is rendered even more complex by Lynn's scientific study of hotel bellboys, which established that the bellboys could double the size of their tips if they performed not only their usual duties but, in addition, merely informed guests how to operate the television and the air conditioning, opened curtains in the room and offered to bring the guests ice.

[...]

Lynn, whose website includes a downloadable booklet on how to get bigger tips, points out how vital it is for service personnel to stand out from the crowd and be noticed - so that customers perceive them as an individual person, rather than a faceless member of staff. He recommends wearing something unusual. In one study, waitresses' tips increased by 17 per cent if they wore flowers in their hair.

And it's not just what you wear. It even helps to be positive about the weather. Sunny weather puts people in a good mood, and people in a good mood leave bigger tips than those in a bad mood. Since even the prospect of sunny weather elevates people's moods, servers who live where the weather is highly variable can increase tips by telling their customers that sunny weather is on the way.

Bruce Rind of Temple University, Pennsylvania, and David Strohmetz of Monmouth University, New Jersey, asked a waitress at a mid- priced Italian restaurant in New Jersey to write a weather forecast on the back of some of her bills, but to omit the message from others. The favourable weather forecast read: "The weather is supposed to be really good tomorrow. I hope you enjoy the day!"

The waitress earned, on average, 19 per cent more in tips from those customers to whom she gave the positive weather forecast. Perhaps they just liked her friendly approach. Indeed, other research suggests waiters can reliably increase their gratuities by (1) giving their names to customers; (2) squatting next to customers' tables; (3) touching their customers; and (4) giving after-dinner mints to diners.

At the heart of the psychology of tipping is the assumption that it hinges on the idea that the person providing the service has control over the quality of the service. However, the research strongly suggests that there is little in the way of a relationship between the actual provision of the service and the tip; but even more intriguingly, we only tip when it doesn't really matter. After all, if it did, as it would if it were brain surgery we were purchasing, we would expect the best service to be included in the price.

Now, if you think you know what to do next time you're in a restaurant, whether as customer or waiter, here's one that has the researchers still scratching their heads. Another of Lynn's studies involved the server drawing a happy face on the bill. On average this increased a waitress's tip by 18 per cent, but decreased a waiter's by 9 per cent.

3 Comments:

Blogger John B. said...

I can just relate personal experience:

If my waiter or waitress has a nice personality and seems to be trying to provide me service, they will get a pretty good tip (usually 20% or more). If they seem uninterested in my eating experience, they will probably get 10% or less tip. I have only 'no tipped' about half a dozen waitresses and waiters in my life (and I eat out a lot for business and pleasure), and these no tips were for behavior or service so lousy and such a lack of effort on the part of the waiter and waitresses that they deserved nothing.


I worked the restaurant racket for years, and I know how these people depend on tips for their livlihood. Waiters and waitresses generally have a great effect on your overall eating experience. Even if the cooks are screwing up or taking a long time to get the food out, a waitress or waiter can make all of the difference in your eating experience, just based on their personality and niceness.

10:03 PM  
Blogger Ono said...

I used to be a cook and there was a Friday night we were swamped and everything was screwed, orders were wrong, food wasn't that great, etc. We felt bad in the kitchen, but turns out we didn't need to, the waitress did excellent business because people felt sorry for them.

10:43 AM  
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