An Economist's Tipping Strategy

(Photo: Marcin Wichary)

I have a friend with whom I regularly eat out at restaurants and from time to time we disagree on how much to tip.  Traditionally, I have been a hard-wired 20% tipper.  But since studying the racial effects of taxi-cab tipping, I’ve been more attracted to tipping less – sometimes closer to 15%.  This has at times created disagreements between my friend and I on how much to tip.  He always wants to tip 20%.  But when we’ve disagreed, we’ve always resolved the issue by tipping the larger amount.  We always split the bill—including the tip—50/50.

But a few weeks ago, my friend and I were eating dinner and experienced exceptionally bad service.  The server twice put in the wrong order and charged us for items that we had not ordered.  I suggested that we reduce our tip to 10% (I note that while I’m high maintenance in many aspect of my life, I’m not persnickety about restaurant service and the last time I reduced my tip to 10% was probably more than 1000 restaurant meals ago).  My friend agreed that the server had made these errors (and indeed, the sever himself acknowledged that the service was subpar),  Nevertheless, my friend still wanted us to leave a 20% tip.

I proposed something different.  I suggested that we should either leave a 10% or a 100% tip and that I’d let my friend decide which was more appropriate.  I said I’d prefer to leave a 100% tip than a 20% tip, in part to signal to the server that something was out of equilibrium.

My friend was very annoyed by my proposal.  He claimed that our norm of leaving the higher preferred amount would not allow one of us to choose an amount 5 times our norm. Additionally, it did not allow one of us to threaten a high amount to extract a low tip.

Nonetheless, my friend gave in and chose to leave 10%, though he was sufficiently upset with my strategy.

For the rest of the evening, our conversation was a little less comfortable because of my “Why Not?” stunt.  A cautionary tale for Freakonomics nation.  (Much safer to play credit card roulette).

For more on tipping, check out the Freakonomics podcast “Should Tipping Be Banned?“