Is tipping just a game? Applying game theory to restaurant tipping behavior

Abstract

The practice of voluntary tipping continues to be the most common compensation method for restaurant front-of-house service staff in the United States. Many previous studies have aimed to understand the outcome of the service exchange relationship, the tip, using only customer evaluations of salient variables. This approach marginalizes the role of the service provider to merely a measure of service quality and not an economic agent who is equally invested in the outcome of the relationship. This study sought to include the customer and the server's perspectives using a game-theoretic model to conceptualize the service exchange relationship more holistically. This study aimed to determine the salient factors in the server and customer's relationship that led to a favorable outcome in the form of a tip for the server. Convenience sampling was used to collect data from restaurant customers and servers. A game-theoretic model was created using customer evaluations of salient variables grounded by server-generated cut-off values. AIC model selection was used to determine the model that balanced information loss with information gain. Finally, logistic regression was used to map the utility-maximizing optimal strategy for a server in the game-theoretic model. Results show that the outcome will be desirable when service quality is perceived as good, the customer is a regular and dines with fewer than seven people.