Tip Nudging: A 3-Part Experimental Analysis of Influencing Tips Through Technological Default Menus

Abstract

Restaurants and services are increasingly using technologically innovative point of sale iPad systems that offer default tipping amounts in their payment services. In this paper, I study the impact of these default tip suggestions through a behavioral economics lens. I first provide a meta-analysis of research on psychological tactics that waiters can use to increase tips. I then examine the effect that default suggestions have on consumer tipping using a series of experiments and a quasi-experiment. First, I show that higher default options anchor customers at higher tipping amounts. Second, I providence evidence that whiplash effects through reactance exist for anchoring customers at overly large amounts, creating negative downstream effects and feelings towards the restaurant. Third, using data from the field, I show that higher suggestions can induce higher tips in a fast-casual field setting, adding over 12\% in tips to a restaurant in Cambridge, MA. The first two results are based on lab experiments and the last is based on a regression discontinuity design. Finally, further channels of research and implications are discussed.