Why Do We Tip? A Look at Hospitality’s Most Irrational Norm
Something I find myself coming back to often, moving through the hospitality world, is how we actually value the service we provide and how that value does or doesn’t translate into money. Tipping is one of those things that, the more you think about it, the less logical it seems. Why do we tip a percentage of the bill, when opening a $100 bottle of wine doesn’t take four times the effort of opening a $25 one? And yet we do it… almost everywhere, almost always, without really questioning it. Having worked in both Greece and the UK, two countries where tipping operates under completely different logic and intensity, I was curious to understand what actually sits behind this norm: is it just habit, or does it reveal something deeper about how we, as people, understand the relationship between service, gratitude, and social pressure? Besides my curiousity on a theoretical level, i wanted to understand if there is any practical takeouts from the literature. Mind you, the paper examined the topic based on data from US, and Israel.
4 reasons why and 1 reason why not
Reason 1.
Tipping doesnt hold up under standard economic logic. There was once a logic that tipping will guarante you better future-service expecations. That cannot be generalised as in the UK coffee shop you do pay upfront and then you receive the product/service. Therefore the tipping can happen at the point of sale but the experience has not yet been received.
Reason 2.
The main reasons people tip are psychological and social but not economic. The data on the paper suggest that the top reasons are “it’s a social norm“, “to show gratitude“, followed “avoiding guild and embarassment“.
Reason 3.
Tipping is a self-reinforcing norm that evolves upward over time. In US tipping doubled over the last century from 10% to 15% and now 20%. Some customers do tip above the average to feel generous and that makes the norm to rise across time.
Reason 4.
Hospitality businesses with tipping tend to have better service ratings than those with fixed service charges. I wonder if this is because on the eyes of the worker, better performance would automatically translates to higher tipping from the customers(?) because it doens’t work this way as we will see later. Tipping is a robust norm that serves all the stakeholders; customers, servers, and the restaurant which is why it’s proven resistant to elimination even when businesses actively try.
Reason 5.
Tips are barely sensitive to actual service quality. Despite servers believing service strongly drives their tips, studies shows that explains less than 2% of the tip variation in tip percentage. My thoughts as I am writing this is to portray that the evidence transferability is not catholic to every environment but it is interesting news that if you work harder as a hospitality worker you might not get a lot more tips and that the tippers will tip anyway.
Ofer Azar’s paper, “The Economics of Tipping” (2020), offers a genuinely well-researched answer not from the perspective of a chef or a restaurant owner, but from that of an economist trying to explain why such a seemingly “irrational” behavior survives, evolves, and in some cases becomes even more entrenched over time.
I found this article by listening a series of podcast few weeks ago, the podcast “Coffee Literature Review” by Christopher Hendon, Doran Pennington, and the guest this time Ofer Azar PhD, which you can find here: https://open.spotify.com/episode/6AYCi91peAHt8XeH8NkjT9 .
Thank you for reading this
Theo Ioannidis
Coffee industry professional, MSc Nutritionist
Reference List:
Azar, O.H. (2020) ‘The economics of tipping’, Journal of Economic Perspectives, 34(2), pp. 215–236.
Hendon, C.H. and Pennington, D. (2024) ‘Ep26. Tipping with Dr. Ofer Azar’, Coffee Literature Review [Podcast]. Available at: https://open.spotify.com/episode/6AYCi91peAHt8XeH8NkjT9 (Accessed: 20 July 2026).