Framework: What are the motives of tipping?

Tipping is the act of paying an additional monetary surcharge on top of a fixed price for a good or service. In simpler words, it is giving out extra money for something that we have already paid for. Economic rationale cannot explain this: theoretically, there is no advantage in producing another monetary transaction without a recuperation in the form of goods or services (Lynn, 2015a). However, studies and economic observations have shown that homo economicus is an unrealistic assumption in framing economic decisions made by consumers. While people do act in their own material self-interest, they also gain utility from doing seemingly unexplainable actions, like the act of tipping or gratuity (Greenberg, 2014). In this blog post, I attempt to construct a theory for the following: 1) Why do people tip? I will examine the literature and construct a summary of the existing theory behind tipping incentive. Then, I will present my own interpretation of why people tip. In the next blog post I will examine the factors that can influence tipping behaviour. Other potential topics may also be examined in future blog posts, revolving around the evolution and fluctuation of tipping motives.

The motives behind tipping can be split into two examinations. The first are the endogenous causes. These causes exist within the consumer and revolve around a consumers innate desire to tip, either for one's own self-desire to and the utility that is attained from it or one's desire to help others. The second are the exogenous factors. Social norms or other environmental, cultural, social, or economic factors may incentivize someone to tip. In a way, these can intertwine. For example, those who have grown up in cultures that favor helping other through the act of monetary gifts (ie. tipping) may feel a greater sense of self-utility when helping others, hence increasing their propensity to tip and their volume of tip given. On the other hand, poorer individuals may feel less utility from tipping due to the increased economic burden they face as a result of an additional unnecessary economic transaction.

In (Lynn, 2015a)'s "A Motivational Framework of Tipping," he proposed a five-fold framework for the drivers that make people tip. He posited that tipping was driven by five factors: "(1) help servers, (2) reward service, (3) gain or maintain future service, (4) gain or maintain social esteem (or prosociality), and (5) fulfill felt obligations and duties." In

(Whaley et al, 2014) posits that tipping is associated with the following motives: type of service provided, social norms, and operational processes, which surround the "well-doneness" of the service provided.

In (Azar, 2007) he presents a multidimensional perspective to look at tipping. He first assumes six different forms of tipping: “reward-tipping”, "price-tipping", "tipping-in-advance", "bribery-tipping", "holiday-tipping", and "gift-tipping". Then, he presents the motives for tipping: Future service, social pressure and fairness.

Lynn (2010) presents five arguments as motives for tipping: Gaining good quality service in the future, Rewarding good quality service, Helping service workers, and Gaining social approval, and Conforming to internalized tipping norms.

Azar (2011) analyses a framework for the implications of tipping. He constructs the following figure to help illustrate the phenomenon:

Approaching tipping from a business standpoint, he posits that tipping 1) can be used as a form of customer monitoring on the service worker 2) can be used as an implicit contract for the waiter to exert higher effort 3) can be used to screen and train workers 4) can be used as a performance measure and also presents a variety of other implications of tipping that are outside the scope of this framework.

Lynn (2009) conducts a survey attempting to quantify the motives for tipping. Based on these 14 questions, he provides a general sense of an individuals tipping motives.

1. ‘‘I tip in order to follow social norms.’’

2. ‘‘I tip in order to reward good service.’’

3. ‘‘I tip in order to get good service from the server in the future.’’

4. ‘‘I tip in order to make a good impression on the server.’’

5. ‘‘I tip in order to make a good impression on other people who

may be looking.’’

6. ‘‘I tip in order to help the server make a living.’’

7. ‘‘I tip in order to support the custom of tipping.’’

8. ‘‘I tip in order to feel satisfaction from doing what is right.’’

9. ‘‘I tip in order to express my generosity.’’

10. ‘‘I tip in order to avoid making the server angry or upset.’’

11. ‘‘I tip in order to avoid appearing poor or cheap.’’

12. ‘‘I tip in order to avoid feeling guilty.’’

13. ‘‘I tip in order to reduce the server’s envy of me.’’

14. ‘‘I tip in order to improve the public image of my gender or

racial/ethnic group.’’

He obtains the following set of data.

Azar (2010) conducts a similar survey-based study on how tipping norms differ between the U.S. and Israel.

Here, it can be concluded that tipping and a social norm and for gratitude are very high in both cultures, although tipping for other reasons, primarily negative reasons, are always higher in the U.S.

Lynn (2016) offers a broader analysis of tipping motives for jobs that aren't particularly well-tipped (eg. Vets, Doctors, etc.) The motives behind tipping are seen in this table.

In this model, we see that primarily altruistic and utilitarian motives are the strongest for almost each one of these components. The last four rows are almost always insignificant.

The following sections of the review will a) Generate a summary-synopsis of the literature examined and b) Present my own interpretation of why people tip.

Synopsis of the Literature (Author's Own)

From this review, it can be concluded that the motives of tipping vary across different studies and the objectives of their studies. However, generally, the framework is four-fold. Rewarding good service and conforming to social norms are the primary drivers of tipping; tipping for future service is also a major driver of tipping. Tipping as an altruistic act or tipping because of the utility gained to self are also reasons for tipping. Tipping for a better self-image (avoidance of guilt and tipping for social status) are less significant reasons for tipping.

Hence, I propose a six-fold structure of tipping. The most significant factor of tipping is tipping to conform to social norms. The second most significant factor of tipping is reward positive service behaviour. The third is tipping to ensure better future service. The fourth is tipping for altruistic purposes, where oneself derives utility from helping others. The fifth is tipping out of the pure belief that service workers need to be helped. The sixth is "avoidant-tipping" (avoidance of guilt, social status).

This structure, in the most part, makes sense. Tipping is a voluntary consumer behaviour where an individual willingly pays a gratuity for no exchange. Although some may argue that altruistic individuals gain joy out of helping others, certainly the large majority of citizens want to hold onto their hard-earned cash, letting it go only out of conformity to social norm. In fact, when so many individuals conform to social norms at such a large propensity (for example, an individual eating over half of their meals in a restaurant or having a valet park their car every night), this driver of tipping may be internalized, and one may instead claim other reasons for tipping, despite their primary motive for tipping being to conform to social norm. As self-image is important to individuals, having a good reason to tip, eg. "I want to help workers" or "I want to reward good service" is much more "better" or "glamorous" of a factor than "I want to fit in." Hence, it is no surprise that the fitting in is the most prevalent reason for tipping.

The second most populous factor for tipping is an interesting one. Although it is certainly true that waiters at restaurants or taxi-drivers serve emotional labor (or, have a greater incentive to worker harder and to perform better quality service), a large amount of workers work in circumstances where the quality of service is immeasurable. For example, a cashier at a fast food chain may have a very limited amount of interaction with a client. Yet, when the option to tip comes up, most people will give some gratuity. Moreover, the phrase "better quality service" is blurry - better as in relative to what? Seeing as a greater proportion of services are tipped than non-tipped, it is impossible to always have better quality service than the last meal, cab-ride, or DoorDash-delivered. My theory is that "better quality service" is in relative to the quality of service one would expect from a non-tipped profession. To illustrate this, image a world free of tips. Although it is certainly true that some waiters, bartenders, and other workers would continue to act prosocially (eg. pouring water into your cup without being asked, striking up a friendly conversation about your day) as it is innately existing in their personality, a large proportion of workers would not. Because if they earn the same amount of money without doing anything, why not make their job easier? I believe this standard is the standard a lot of consumers go by when considering when to tip and when not to tip. Workers know this, and they go above-and-beyond our expectations to earn tips. We don't go on a cab ride to have a conversation or get a bottle of water -- we go on it to go somewhere. All that extra stuff is extra (money).

The third step of the framework: tipping to ensure better future service - is a fairly straightforward one. If we look at it from an economic lens, it may be more economically rational to tip a place you regularly visit so you would gain more benefits. These benefits are accumulative, and they could range from economic benefits -- such as getting a free car wash to a free drink on the weekends. To other sorts of benefits, such as being able to skip the queue or getting better quality service because the workers know that you will pay more than other customers for the same service.

The fourth step of the framework is tipping for altruism purposes. This can be analysed in conjunction to the fifth step: tipping out of the pure belief that service workers need to be helped. Tipping for altruism is driven by an intrinsic desire to help others without expecting anything in return. The tipper acts out of empathy, kindness, or the wish to contribute to someone else's well-being. This behaviour is rooted in the psychological benefits that one gains from helping others. In fact, altruistic tipping can occur even when service quality is average or poor. Tips may even be greater for poor services. When we think "They aren't a good service provider" altruistic tippers may think "They are having a bad day." This can lead to consistent tipping behavior regardless of the context, showing that the act of giving is motivated by internal moral principles rather than external factors. I won't get too deep into this, but altruistic tipping reflects broader social behaviors and can be linked to prosocial actions in other areas of life. It suggests a strong belief in helping others purely for the sake of doing good, which could be influenced by cultural norms, upbringing, or personal experiences.

Tipping out of the pure belief that service workers need to be helped is similar to tipping in forms of altruism because altruistic tippers tip out of self-benefit of helping others whereas service-worker-helpers may also tip because they believe that macro-level problems in the labor market start from micro-level reforms, even if it means losing their own money in the form of a gratuity.

What is the difference between "avoidant-tipping" and "conforming to social norms?" Well, avoidant tipping is tipping not to present oneself negatively in front of society. Conforming to social norms is tipping in order to present oneself positively in front of society. These two statements are not converse nor contrapositive. Instead, these two statements carry binary meanings. "Avoidant-tipping" is forceful, "conforming to social norms" is less forceful and more coercive.

Now that I have examined each rung of the framework, I would like to examine how they interact. It is already said that "avoidant-tippers" and "norm-conformist-tippers" may cite another reason for their method of tipping. It is clear that they care about their social perceptions, so when asked why they tip, whats to stop them from not caring about their social perceptions then? A similar mindset may apply for those who tip out of their self interest, such as getting better future service.

The most generally accepted motive behind tipping is tipping for the sake of good service. In fact, there are multiple studies showing that high-end service occupations/locations receive a greater amount of tip from consumers. However, this confounds with the other factors of the framework: higher end consumers are more likely to care about their social perception and also more likely to be aware of the problems facing the labor industry and service workers today. Instead, it is worthy to examine other locations where tips are high. (Shih et al, 2019), (Lynn et al, 2012) and (Lavoie et al, 2020) all find that consumers respond more positively when there is a close bond between the service worker and consumer. This perfectly supports the ranking of the tipping framework. For one, social-norm-conformist and avoidant-tippers tippers will tip an occupation regardless of the quality of service provided (with the exception that the quality of service provided is terrible; in that case, the social norm would be not to tip). A higher amount of tip indicates that the social-norm-conformist tippers tip not only for the reason of conformity, but on top of that they believe that the quality of service or some other factor of the framework warrants the amount. The "quality-of-service" tippers will naturally tip higher. Those who tip to maintain a future relationship have a large incentive to pay extra, as they wish to maintain the close relationship they have garnered with the service provider through a monetary, transactional relationship. The altruists and service-worker tippers will tip an amount regardless of the quality of service.

Hence, insofar provides a broad application and analysis of the ordered tipping framework I have discovered. Expect add-ons to framework in future blog posts and also more specific examples which I can apply and revise this theory to. Thanks for reading!