The Tipping Point: The Economics of Taxi Fares

I'm not even too old and remember the time when 10% was considered a decent tip (at restaurants, cabs), and 12-15% would be reserved for exceptional service. And tips were always calculated pre-tax. Now 20% on the total amount has become the default. How did we get to this?

Regardless of the debate of whether tipping should be the norm, I&#x27;ve found that nearly all of the suggested tip amounts are generated using the after tax price.<p>When I was young my dad pointed this out to me when it would happen on restaurant receipts, and then I&#x27;d have to listen to him tell the waiter who clearly did not care. But especially now, nearly all of the suggested tip amounts are calculated after tax is included. After seeing it done so much I think this has become the norm, and don&#x27;t even check the pre-tax vs post-tax math anymore.

&gt; Tip menu suggestions can “actually increase the wages of workers without necessarily making life terrible for consumers or taking money away from them,”<p>Isn&#x27;t anything that increases the wages of workers via increased tips definitionally taking money away from consumers? (If you argue that they get $1 of utility by not having to think about the amount to tip, you might not be taking <i>utility</i> away from them, but you&#x27;re still taking <i>money</i> away from them.)

ITT: people that are high wage earners in the industry with the highest potential upward mobility that want to argue about the basis and percentage of tips for people doing the work with the least possible upward mobility.<p>Tipping, at a minimum, is social grease, and to the extent that you want it to be, redistributive economics with near zero administrative overhead.

The original Uber &quot;no-tip&quot; model was just great. For the users but the drivers as well (not getting exploited by the medallion racket). Sad to see we’re reverting to tipping.

I totally relate to &quot;as cost goes up the default options become less attractive&quot;. I don&#x27;t mind the typical options being a bit high (when did 20% become the low end??) but I&#x27;ll opt out and put in my own amount when the bill is above say $20.

I do not understand why when I pick up food it asks for me a 20% tip. Maybe I&#x27;m off base but isn&#x27;t, as a bare minimum, the job of someone making a pizza to make a pizza? As someone who has worked in the restaurant industry for a number of years, and been part of a chain closure because a manager was stealing tips, I do not understand why anyone would tip for pickup. As someone whose prepared the food for pickups, I can say 100% that none of us in the kitchen thought what we were doing deserved more money than the rate we were being paid.

&gt; If the cost of computing an acceptable tip is around a dollar<p>That seems more than a bit high..$1 for something that takes 10-30 seconds max, assuming you can&#x27;t do it in your head and pull out your phone calculator?

&gt; Donkor found that around 60% of people chose a tip from the menu, indicating that most passengers preferred not to have to calculate a tip in their heads.<p>That assumption seems to be quite a stretch. Naively I would think that major drivers for this behavior are saving time and comparatively terrible custom tip experience.<p>Personally I love doing mental math, but still use preselected tip in situations with external pressure. For example when there is a line of people behind me in a coffee shop or I am trying to get out of taxi fast so the driver is not waiting on me.

I don&#x27;t take taxis because of this. Too hard to predict spend.

This article is beyond absurd.<p>It&#x27;s bending over backwards to promote how tipping is actually for the <i>tipper&#x27;s</i> benefit. And that recommending large tips via touch screen menus is so helpful in saving them the time to do mental math.<p>Then the author places an arbitrary value of $1 on that mental math (???) to exclaim that large suggested tips saves the passenger both time and (fictional) money! Welfare has increased by more than 200,000 (completely made up dollars) per day!<p>Seriously, wtf, Stanford Business?