In this chapter, I applied the theory of consumer choice to model the relationship between restaurant tipping and consumer behavior. Using this model, I demonstrated how consumer behavior responds to restaurant tipping and how tipping affects consumer-utility among different types of consumers and economic efficiency. The economic theoretical analysis reveals that tipping discourages customers’ demand for restaurant meals, which in turn creates bigger excess burden in the market.
School of Business and Economics, Indiana University Northwest, Gary, IN 46408, USA
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