> I also should have added, and probably led with, the fact that tipping addresses a big agent-principal problem in hospitality: in restaurants where servers rely on tips, their incentives are strongly aligned with those of customers; without tips, virtually all the incentives are aligned with that of management.
Very astute of you to mention this, though “address” and “cause” could be used interchangeably.
When I was a bartender it was always in my interest to give away free alcohol to my highest tipping customers, who generally understood that it’s customary to add 50% of the cost they would have paid to their tip for each free drink.
At a very surface level, the tipping system incentivizes employees to steal product from the business to give to customers. But the game theory gets very complicated.
Sometimes this results in a great customer base that forms the core of a “social engine” that powers the popularity of a bar/restaurant and results in a win-win-win. Bar owners set various levels/thresholds/criteria for how much free sample can be given out and under what circumstances.
Tl;dr: the principal-agent problem can almost never be solved to align all parties in a system.
Very astute of you to mention this, though “address” and “cause” could be used interchangeably.
When I was a bartender it was always in my interest to give away free alcohol to my highest tipping customers, who generally understood that it’s customary to add 50% of the cost they would have paid to their tip for each free drink.
At a very surface level, the tipping system incentivizes employees to steal product from the business to give to customers. But the game theory gets very complicated. Sometimes this results in a great customer base that forms the core of a “social engine” that powers the popularity of a bar/restaurant and results in a win-win-win. Bar owners set various levels/thresholds/criteria for how much free sample can be given out and under what circumstances.
Tl;dr: the principal-agent problem can almost never be solved to align all parties in a system.