Tipping seems to be a way to price discriminate [among] consumers via getting them to pay as much [of] your labor costs as they are willing to tolerate.
As I like to say, Price Discrimination Explains Everything.
Tipping seems to be a way to price discriminate [among] consumers via getting them to pay as much [of] your labor costs as they are willing to tolerate.
As I like to say, Price Discrimination Explains Everything.
Why does anyone tip another person or an establishment one will never visit again? Fairness? Altruism? Uber has solved this problem since they record passengers’ tips and drivers’ ratings of passengers now depend in part on tips.
Huh? I thought you don’t tip with Uber?
Re: Uber tipping.
https://www.usatoday.com/story/tech/news/2017/06/20/should-you-tip-your-uber-driver/103047078/
Compensation heavily weighted toward tips or other commissions are a way to weed out the worst servers, without any confrontation, expensive performance reviews or firing. This works in two ways, first the absolute low pay that poor employees end up with and eventually they quit for an hourly gig. The other is the ability to push their shifts toward dead times and effectively drop compensation without reducing hours.
I have a fun, recent anecdote about price discrimination, not about tipping. I was buying eyeglasses recently. The salesperson quoted me a price of just over $400. I must have visibly balked, because they came back with, “Of course, that’s with the anti-reflective coating. Without this, the price drops to $250.” I was thinking, there’s no way that the “production cost” of this coating is really $150. This is price discrimination at work. They’re trying to pick up the marginal customers like me because they make a profit at $250/pair, but they need people spending $400/pair to actually pay for the fixed costs of running an optometrist’s office.
A few weeks later I stopped by to pick up my glasses and they told me that they did the anti-reflective coating for free. To me this confirmed my price discrimination story. (PDEE indeed!) I’ll bet they actually default to manufacturing lenses with the coating, and it probably costs them more to do a special order *without* the coating. I’m thinking there’s no way they just gave away a feature costing them $150 for free. But it’s a neat bargaining chip to ferret out the price-sensitive customers. My back-and-forth with the sales person was very similar to a scenario I’ve heard David Friedman give to illustrate price discrimination, also involving eyeglasses.
http://grokinfullness.blogspot.com/2017/07/economic-lessons-shopping-for-eyeglasses.html