D AVID FRANK started working for tips when he was 11 years old, delighting restaurant diners in New York with his magic tricks. As a teenager he would make an average of $60-70 in an evening—not bad, but he wanted more. So he started reading research on tipping, and found a study showing that servers who left a sweet at the end of the meal could up their pay. He tried handing punters a playing card at the end of his act, hoping that the memento would persuade them to part with more cash. It worked.
Mr Frank’s findings confirmed the notion of the tip as a sort of reward for outstanding service. That may sound straightforward, but a follow-up study with Michael Lynn of Cornell University, where Mr Frank now happens to be a student, found an opportunity for some sleight of hand. They discovered that performing a magic trick at a table also increased the tips for the waiters and waitresses serving there, even though they had done absolutely nothing more than usual. Though tipping may seem like a simple economic transaction, by incentivising people to perform extra well, it turns out to be anything but.
For a start, economists are puzzled by the fact that so many people give tips, voluntarily handing out cash for a routine service, when it is assumed that customers generally want to pay as little as possible for what they buy. But fuzzier factors also seem to matter, like the feelings of gratitude that Mr Frank inspired. A survey in 2010 by Ofer Azar of Israel’s Ben-Gurion University of the Negev found that 85% of American tippers claimed to be following a social norm, while 60% said they tipped to avoid guilt (see chart 1).