If there’s one thing economists are good at, it’s taking the fun out of everyday things. Many times have I seen the exasperation on people’s faces after responding to their stories with a matter-of-factly statement, firmly grounded in expected utility. As a result, dinner party invites can be hard to come by - economic analysis is the kind of work that’s hard not to take home, as its subject matter is everywhere around us.
But economists, like other people, also have to eat (cue ‘free lunch’ joke). Some even like food so much that they write books about it. And when nobody invites them to dinner, economists do the rational thing and go out for food themselves. Sometimes, they hunt in packs and book a table at a restaurant together – it has been proven that such arrangements minimise social welfare loss measured in conversation utility. For these reasons (and perhaps some social motivation of minor importance), a group of us (mostly PhD students at UoN) are planning to go out for a meal this Friday. We do this about once a term, and don’t worry – we’re easy to spot in case you want to make a timely exit from the restaurant.
The tipping issue
There is a slight concern among my office mates that we will repeat last time’s painful conclusion to the dinner. Thing is, we came up short. After the bill had been passed around the table, calculations made and cash and cards gathered in a big heap… the restaurant was still owed some money (cue grumpy waiters). Some of us eventually made up the difference – insisting they had now paid for their mail, factored in a lavish tip AND paid for somebody else’s food. As a matter of fact, everyone of us seemed to be convinced that they had paid at least their share and that the shortfall was due to others. Unsurprisingly, the waiters did not receive a tip.
It appears that economists have yet again ruined the fun for everyone – many restaurants now automatically add a ‘service charge’ to the bill of any group of at least 6 diners. Whilst the fairness of this practice is disputed by some (you can sign an e-petition against it on a government website and have the honour of being the 3rd person in the UK to officially complain about it), I believe it is quite common. Not for a second do believe that the service charge compensates the restaurant staff for increasing marginal effort expended per guest. I remember well from my job as a waiter in my undergrad days that a table of 12 is a lot easier to serve than 6 couples (which, come to think of it, also explains why my former boss only required my skills when there was a group reservation). So it must be about the money.
Whether the restaurant owner keeps all the tips for himself or shares them with the staff is not important, seeing as higher tips are always better for the restaurant owner. Anyway, that’s not the point – the point is that groups have to be ‘encouraged’ to tip. I think the restaurant owners’ association might at some point have added this 1975 paper with the great title ‘Cheaper by the Bunch‘ to its reading list. The study presents evidence that the average tip in groups is lower, and the authors claim this is due to a diffusion of responsibility effect (the with remarkable foresight aptly titled best-seller The Tipping Point calls this the bystander effect). So the more bystanders, the less the urgency to tip – makes sense, right? A more recent empirical study suggests that there is a counterbalancing force – the social penalty imposed on the person that doesn’t tip – and that these effects cancel each other out.
Unfortunately neither of these studies prevents evidence on groups of economists failing to pay even the required amount minus tips at the first time of asking. Perhaps that’s just a reflection of academic funding these days…
