Abstract
Tipping is an interesting economic behavior because it is an expense that consumers are free to avoid. Although called for by social norms, tips are not legally required. Furthermore, since tips are not given until after services have been rendered, they are not necessary to get good service in establishments that are infrequently patronized. For this reason, many economists regard tipping as mysterious or seemingly irrational behavior. The present chapter explores this behavior and its implications for economic theory and public policy. The chapter is divided into four sections. The first two sections provide more detail about the phenomenon of tipping by summarizing and discussing the results of empirical research on the determinants and predictors of restaurant tipping and of national differences in tipping customs respectively. Then, economic theories about tipping are reviewed in light of the previously summarized empirical literature. Finally, the public welfare and policy issues raised by tipping are discussed.
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