Faculty & Research
The Effects on Perceived Restaurant Expensiveness of Tipping and Its Alternatives
Vol 7 No 3
By: Shuo Wang Ph.D. Candidate and Michael Lynn Ph.D.
Executive Summary: Research on behavioral pricing has found that presenting the price of a product or service in separate parts rather than a consolidated whole can reduce consumers' perceptions of the total cost. That principle suggests that restaurants which charge separate fees for their food and service whether by voluntary tipping or an automatic service charge may be perceived as less expensive than those that include service charges in the form of an all-inclusive price. An internet-based simulation testing that idea found that participants rated restaurants with tipping or automatic gratuity policies as less expensive than restaurants that built the costs of service into menu prices. Furthermore, participants ordered more expensive meals when automatic gratuities were added to the bill than when the costs of service were built into menu prices. While the study was a simulation only (and no money was at stake), the industry's longstanding practice of setting menu prices with service charges extra is supported by these findings.
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- The Effects on Perceived Restaurant Expensiveness of Tipping and Its Alternatives By: Shuo Wang Ph.D. Candidate and Michael Lynn Ph.D.
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Other Reports or Articles You May Find of Interest
- An Examination of Guest Complaints and Complaint Communication Channels: The Medium Does Matter!, by Alex M. Susskind
- Tipping and Its Alternatives: A Comparison of Tipping, Service Charges, and Service-inclusive Pricing, by Michael Lynn
- Unlocking the Secrets of Customers' Choices, by Rohit Verma
About Shuo Wang Ph.D. Candidate
Shuo Wang is a Ph.D. student at Cornell University School of Hotel Administration. In addition to his first-hand experience as a marketing and revenue-management practitioner, his primary research focus is on customer behavior.
About Michael Lynn Ph.D.
Dr. Michael Lynn is a professor of consumer behavior and marketing at the Cornell University School of Hotel Administration. He received his Ph.D. in Social Psychology from the Ohio State University in 1987, and has taught in the marketing departments of business and hospitality schools since 1988. Dr. Lynn paid his way through school by waiting tables and bartending. This experience sparked his interest in service gratuities (tipping), a topic on which he has over 35 published academic papers. His other research focuses on consumer status and uniqueness seeking. Dr. Lynn is the past editor of the Cornell Hospitality Quarterly, and is currently on the editorial board of the Journal of Academy Marketing Science, which gave him an outstanding reviewer award in 2006.
