By Dr. Tim Sandle
DIGITAL JOURNAL
May 28, 2026
Restaurant terraces in France reopened on May 19 after months of closures
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Why do people leave tips? A seemingly simple question opens onto a revealing intersection of psychology, economics and social norms—and, more critically, the structure of labour itself.
New research, based on behavioural game theory, suggests that tipping is driven by two distinct motivations: some people tip to reward good service, while others do so out of social pressure. Yet beneath this behavioural insight lies a deeper story about power, income inequality and who ultimately bears the cost of service work.
The research is presented, but also critiqued.
A recent study in Management Science by Dr. Ran Snitkovsky (Tel Aviv University) and Prof. Laurens Debo (Dartmouth College) uses game theory and behavioural economics to dissect this everyday habit. Their model divides customers into two groups: “appreciators,” who tip based on perceived service quality, and “conformists,” who follow prevailing norms. The interplay between these groups helps explain why tipping rates—at least in countries like the U.S.—have steadily crept upward over time.
Appreciators tend to give more than the standard percentage when they feel service warrants it. Conformists, meanwhile, track the average and adjust their tipping accordingly. The result is a ratchet effect: higher tips from appreciators pull up the baseline, which conformists then adopt. Over decades, what was once a 10% norm has evolved into 20% or more.
Why do people leave tips? A seemingly simple question opens onto a revealing intersection of psychology, economics and social norms—and, more critically, the structure of labour itself.
New research, based on behavioural game theory, suggests that tipping is driven by two distinct motivations: some people tip to reward good service, while others do so out of social pressure. Yet beneath this behavioural insight lies a deeper story about power, income inequality and who ultimately bears the cost of service work.
The research is presented, but also critiqued.
A recent study in Management Science by Dr. Ran Snitkovsky (Tel Aviv University) and Prof. Laurens Debo (Dartmouth College) uses game theory and behavioural economics to dissect this everyday habit. Their model divides customers into two groups: “appreciators,” who tip based on perceived service quality, and “conformists,” who follow prevailing norms. The interplay between these groups helps explain why tipping rates—at least in countries like the U.S.—have steadily crept upward over time.
Appreciators tend to give more than the standard percentage when they feel service warrants it. Conformists, meanwhile, track the average and adjust their tipping accordingly. The result is a ratchet effect: higher tips from appreciators pull up the baseline, which conformists then adopt. Over decades, what was once a 10% norm has evolved into 20% or more.
How does tipping work with classical economics?
At one level, this reflects the familiar mechanisms of social influence. Yet, as Snitkovsky himself notes, tipping poses a challenge to classical economic theory. The rational “homo economicus” has little incentive to tip once a service has been delivered—especially in one-off encounters like a taxi ride in another city. The persistence of tipping therefore points to something beyond strict self-interest: a mix of social signalling, empathy and conformity.
But this is only part of the story. From a broader political economy perspective, tipping can also be understood as a mechanism that shifts responsibility for wages away from employers and onto customers. In the U.S., tipping is not a marginal practice—it constitutes a multibillion-dollar system, generating over $50 billion annually and forming a core part of income for millions of workers.
What do alternative thinkers think?
Here, the alternative critique runs that, under capitalism, labour is commodified, and employers seek to minimise the cost of that labour. Tipping effectively externalises part of the wage relationship. Rather than employers paying workers directly for their labour power, customers are drawn into the process, supplementing wages through discretionary payments. This obscures the true cost of labour and fragments accountability.
The “tip credit” system offers a clear illustration. In many U.S. states, employers are permitted to pay workers below the standard minimum wage, on the assumption that tips will make up the difference. While this may reduce prices and increase service availability—a point the study acknowledges—it does so by embedding insecurity into workers’ earnings. The nominal wage becomes detached from the real income required for subsistence, which now fluctuates with customer behaviour.
This represents a subtle form of surplus extraction, which the research paper does not touch upon. Employers benefit from lower direct wage costs, while the variability of income is borne by workers. Meanwhile, customers are effectively enlisted into the wage system, subsidising business operations while believing they are simply rewarding individual service.
Do tips incentivise workers?
The study’s findings also reveal the limits of tipping as an incentive mechanism. Because many customers tip out of conformity rather than genuine evaluation, servers often receive a predictable percentage regardless of actual performance. This weakens the link between effort and reward, undermining the argument that tipping reliably drives better service. In effect, the system functions less as a performance-based reward and more as a socially enforced norm.
There are further social costs. Research has consistently shown that tipping can reinforce inequalities and biases. Female servers, for instance, may feel pressured to tolerate inappropriate behaviour to secure tips, while studies also point to disparities linked to ethnicity and appearance. In such cases, tipping does not merely reflect service quality—it reproduces broader social hierarchies within the workplace.
Forms of power and control?
Yet the system persists, in part because it benefits multiple stakeholders in different ways. Customers retain the illusion of control, choosing how much to give. Employers reduce wage obligations. And workers, in some cases, may earn more than they would under fixed wages—though at the price of income instability and dependency on customer goodwill.
The dual motivations —appreciation and conformity—thus sit within a larger economic framework. What appears as a personal gesture is, in reality, embedded in a structural arrangement that shapes how labour is valued and compensated.
If anything, the study underscores the complexity of tipping. It is neither purely altruistic nor purely coercive, but a hybrid practice sustained by social expectation and economic design. However, as debates around wage fairness and labour rights intensify, tipping may increasingly be viewed not as a benign custom, but as a symptom of deeper imbalances in the service economy.
In that sense, the question is not only why we tip—but why the system requires us to.
The research appears in the journal Management Science, titled “A Modeling Framework for Tipping in the Presence of a Social Norm.”
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