A new paper in *Management Science* argues that tipping endures because some customers tip out of genuine appreciation while others follow social norms. The researchers say high tippers can gradually pull the perceived “standard” tip upward, even as the link between tips and service quality remains limited in many settings.
A study published in Management Science examines why tipping remains common — even in one-time transactions where customers are unlikely to see the same worker again — and why tipping norms can creep upward over time.
The research, by Dr. Ran Snitkovsky of the Coller School of Management at Tel Aviv University and Prof. Laurens Debo of Dartmouth College’s Tuck School of Business, uses a theoretical model grounded in game theory and behavioral economics to explain tipping as a mix of gratitude and social pressure.
“Tipping is a phenomenon that is difficult to explain using classical economic tools,” Snitkovsky said in a Tel Aviv University release distributed by ScienceDaily. He argued that a purely self-interested customer has no clear reason to tip after service has already been provided, and said this is especially apparent in cases such as tipping a taxi driver in New York, where repeat encounters are unlikely.
In the researchers’ framework, customers fall into two broad groups: “appreciators,” who tip based on their own valuation of the service interaction, and “conformists,” who mainly try to match what they believe is socially expected. The model suggests that when appreciators routinely tip above the customary amount, they can raise the average tip that conformists then chase, gradually pushing norms higher.
Snitkovsky said the dynamic could help explain why tipping in the United States was commonly around 10% decades ago and is now closer to 20%. The study also says rising tip levels may be linked to growing economic inequality, citing a hypothesis previously proposed by Tel Aviv University law professor Yoram Margalioth.
The study also questions how strongly tipping improves service. Because many customers tip according to social convention rather than performance, the model suggests servers may often receive the customary percentage regardless of effort — weakening the incentive to provide significantly better service.
Beyond consumer behavior, the paper analyzes the economics of U.S. “tip credit” rules, which in most states allow employers to pay tipped workers less than the standard minimum wage while requiring that tips bring workers up to at least the minimum. In the example provided by the researchers, an $8 minimum wage combined with a $3 tipped wage means tips are expected to cover the remaining $5, and employers must make up any shortfall.
Snitkovsky said higher tip credits can enable businesses to lower posted prices by relying more heavily on tips to finance labor, potentially allowing them to serve more customers — but he argued that the efficiency comes at the expense of individual servers’ earnings, because the system can function as a way for employers to capture part of what would otherwise be gratuity income.
Snitkovsky also pointed to prior research suggesting tipping can contribute to social harms, including sexual harassment risks for female servers and racial bias in tipping behavior. At the same time, he said tipping can allow customers who are willing to pay more to do so, effectively subsidizing service for others, and can provide some incentive for performance — though he argued that modern tools such as online reviews and in-house monitoring give businesses other ways to evaluate service quality.
