Business strategy and the social norm of tipping

Research output: Contribution to journalArticlepeer-review

55 Scopus citations

Abstract

Tipping is an important economic phenomenon, involving about $47. billion a year in the US food industry alone, and trillions of dollars across different occupations and countries over the years. Moreover, tipping is a major source of income for millions of workers. This article discusses the implications of tipping for business strategy in the relevant industries. For example, firms can choose to impose a compulsory service charge in lieu of tipping - what are the advantages and disadvantages of doing so? How does tipping change the profit-maximizing level of investing in screening job applicants, training workers, monitoring them, and providing performance-based incentives by the firm? Can industries such as the music industry use tips (i.e., prices being voluntary and determined by the customers) as an alternative business model?.

Original languageEnglish
Pages (from-to)515-525
Number of pages11
JournalJournal of Economic Psychology
Volume32
Issue number3
DOIs
StatePublished - 1 Jun 2011

Keywords

  • Business strategy
  • Restaurant industry
  • Service industry
  • Social norms
  • Tipping

ASJC Scopus subject areas

  • Applied Psychology
  • Sociology and Political Science
  • Economics and Econometrics

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