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Stanley SeidenStanley Yu

ECON 488November 30, 2009

Tipping Behavior: An Experimental Approach

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Question Addressed

How does tipping behavior change based on the information presented on the bill and customers' method of payment?

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Inspiration

Irrational behaviors Debit or credit card round the total (including tip) to

a whole number, even though there is no logical reasoning

Suggested tips Do people follow (strictly vs. as a guide)? Convenient or insulting?

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Background

Each year in the United States, diners leave some $42 billion in tips at full-service restaurants

Restaurants are now printing a “suggested gratuity” right at the bottom of the check. However, if you take a close look, you’ll see that restaurants are trying to bump up the tip by calculating the suggestion on the check total, not the total minus tax.

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Hypotheses

Bills with suggested tip amounts given will garner the largest tip amount across the three conditions Guilt Estimate based on post-tax suggested gratuity

For given price, longer receipt (more items) might yield higher tips Waiter is “doing” more

Paying with a card, people would be more likely to irrationally tip so the total amount comes to a whole dollar

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Results

13/22 participants (59%) tipped so total rounded to a whole number8/22 participants (36%) used at least one suggested tip amount as given

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Data 1

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Data 28

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Data 4

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Data 5

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Variance Observations11

Highest with cheap meals

Lowest with medium service

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Analysis

Results of expensive bill comparison deny hypothesis

Effects of suggested tip amount: Slightly higher tipping, but not by much Slightly more predictable tipping amount

Various irrational strategies common: High tipping with cheap bills Rounding Tipping in general lower than suggested tip amounts

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Takeaways

While this seems minor, it probably is. However, people should be aware that the suggested tip is not accurate if they are depending on it to tip appropriately

In small restaurants, intimacy is more important. Something as impersonal as a computerized “Tip Table” — especially a post-tax one — doesn’t foster that

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Limitations of Study

Limited sample size (22)Difficult to recreate complete dining

experience Many factors influence tip

Participants are not handing over their own money

There is the possibility that there is no consistent pattern to tipping in the real world!