Blog Post #2: Tipping Culture
Tipping culture has changed drastically over time. Originating in the 16th century in England, where guests staying overnight would leave money for their host’s servants as a sign of thanks, it has evolved from being a voluntary gesture of appreciation to a widely expected act—even if there is no service at all. Why are humans still inclined to tip even when they don’t explicitly want to do so?
Tipping is different in each country. It has almost become “common sense” to know how much to tip in each place. For example, in the U.S., it is customary to tip a waiter at least 15-25%, whereas in places like Japan or Hong Kong, tipping culture does not even exist in the first place. According to an article titled, “The Psychology that Motivates Tipping”, the University of Pennsylvania’s Professor Edward Mansfield conducted a study of how tipping customs spread from one place to another on the premise that “[t]ipping is economically consequential but at its root it’s a social norm.” In his study, Professor Mansfield found that foreign students, or people who travelled to the US more frequently, were more inclined to bring the high tipping culture back to their country. He concluded, “For countries where there are more people who come to the US as a percentage of the total population of that country…the rate of tipping in their country tends to be higher.”
On top of that, a huge part of the motivation behind tipping is the feeling of social approval and doing what is “easy”. This phenomenon is referred to as the rate of effective consent, where people are more inclined to do whatever is easiest (e.g., the default option). For example, research has shown that, for taxi rides, people tend to tip more using the screen interface than in cash. When the screen interface showed options for 20%, 25%, and 30% tips, which were higher than usual, people tended to choose those higher amount tips, even though they could choose the option “other” and input a custom tip amount. This strategy to induce higher tips works because it’s easier to just click a single button (compared to multiple buttons for a custom tip), and it also alters people’s perception, suggesting that giving less than a 20% tip means they’re being cheap. Economists use these default settings to motivate behaviors associated with tipping culture and more.
An article titled, “The Dark Side of Touch-Screen Tipping” describes how Covid-19 was a major driver for many businesses to change from jar tipping to screen tipping, which created much more revenue. The article states how “some survey data suggests people who do leave a gratuity on a touch screen tend to tip more than they would if they were, say, throwing coins into a jar at the till.” Out of 2,000 Americans, ⅔ answered that they left at least 11% more when tipping on the screen compared to when using cash.
Overall, it is interesting to explore the connection with behavioral economics behind something many of us do everyday: tipping. And the next time we see the “default” option that tips more than we feel is appropriate, we can reconsider the psychology behind why that was set as the default option and what that pushes consumers to choose.
