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Do You Believe in “Tip Coordination?”

Posted by gratrueities on November 6, 2009

You can even order a t-shirt that poses this very question! In the first ‘Seinfeld reunion‘ episode of ‘Curb Your Enthusiam,’ Larry David shares with Jason Alexander his feelings on the subject. What is “tip coordination” you may ask?  Basically, it is an agreement, when splitting a restaurant bill, that all will tip the same amount or percentage – price fixing, if you wish!  Here is an interesting commentary on the psychology of tipping and the subject of “tip coordination” from the blog cheeptalk.wordpress.com:

“Economists have often wondered why people tip.  We have lots of sophisticated explanations for why rational (i.e. selfish)    people pretend to be altruistic.  A leading explanation, the reputation model, relies on some repeated game concern but how would that apply in a one shot waiter game?  The puzzle is, of course, easily resolved if one allows homo economicus to have a heart. Warm, mushy feelings for waiters can easily explain tipping, even if you both know your relationship is the restaurant equivalent of the one night stand.

As our well-educated and well-read readers know, the heart is a complicated thing and often responds to incentives in odd ways.  Larry David is the dark Jane Austen of our cynical time and his (second!) magnum opus, Curb Your Enthusiasm, is the warped Sense and Sensibility.  I enjoyed the Seinfeld non-Reunion episode.  There were so many treasures in one half hour but the business lunch between Larry and Jason Alexander was my favorite bit. Larry and Alexander go dutch and Larry suggests they coordinate the tip.  He wishes to avoid the embarrassment of under-tipping.  It is just obvious to Larry that other people’s opinion matters so he must tip.  Note it is not morality but image and hence self-image that guide Larry.  He certainly does not want to tip low when his Dutch partner tips high.  But if your partner tips low, there is still an incentive to tip high, because it is quite natural that you want your image to be better than your partner’s.  In other words, there is a dominant strategy to tip high…a Prisoner’s Dilemma of tipping. Once we open up the heart of homo economicus, not only is there an incentive to tip, but toovertip.  No wonder Larry wants to collude and coordinate tips.”


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