The Effects of Tipping on Consumers' Satisfaction with Restaurants

Abstract

This paper contributes to the policy debate about whether or not tipping should be outlawed by identifying the potential pros and cons of tipping from a consumer perspective and assessing their net effects in a field study that compares restaurant customer satisfaction under tipping and no‐tipping systems. Recent changes in the restaurant chain Joe's Crab Shack's policies regarding tipping provided an opportunity to assess the effects of those changes on customer satisfaction. Analyses indicate that online ratings of the dining experience were reliably higher when the rated restaurants operated under a tipping system than when they operated under a no‐tipping, service‐inclusive pricing system. These findings provide an important counter‐argument to those calling for the abolition of restaurant tipping.