The Economics of Tipping
Tipping norms vary hugely between countries. Economists study why people tip when they do not have to.
By Felix Narayan | Sep 1, 2026 | 5 min
Tipping is a puzzle for economists: people pay extra voluntarily, often to people they will never see again.
Social norms explain much of it.
I Why people tip
- — Social norms and avoiding embarrassment
- — Rewarding good service
- — Supporting low-paid workers
- — Habit
II International differences
In some countries tipping is expected and makes up a large part of wages; in others service is included and tipping is rare.
III Digital tipping prompts
Card terminals and apps increasingly suggest tips, often with high default percentages. These act as anchors.
IV Debates
Critics argue tipping shifts wage costs to customers and can lead to bias. See our guides on anchoring and social proof.
V Tipping and service quality
Research has found that the link between service quality and tip size is weaker than many people assume. Factors such as the weather, the server’s friendliness, writing a thank-you on the bill, or simply the total bill size can influence tips. This has led some economists to question whether tipping is a good way to reward service, and some restaurants have moved to service-included pricing instead.
This is general educational information about economics, not financial, investment, or tax advice. Consult a qualified, licensed professional before making financial decisions.
Further reading
- 1. Charm Pricing vs Round Pricing: When Each Works
- 2. Why Prices End in .99
- 3. Why Companies Bundle Products Together