Consider this. You stop at a restaurant in a small town en route to another city. You are aware that you are unlikely to visit the restaurant for a long time to come. Would you still tip the waiter?

Rationally speaking, you should not, for tips stands for “To Insure Prompt Service”. So, if you are unlikely to revisit, you do not have to insure for prompt service the next time around.

Yet, you would tip the waiter. Why? For one, this is a one-to-one transaction between you and the waiter. You would not want the waiter to think badly of you — just because you did not tip her. And, two, tipping has become a norm than a voluntary act.

The economics, however, gets interesting when you frequent a restaurant. How then will you tip the waiter? Tipping assumes importance, for the waiter can ruin or improve your experience at the restaurant.

Suppose you decide to leave a 10 per cent tip. After a while, the waiters (assuming a group of three or four waiters take turns to wait on you during your visits) can read your tipping “model”. So, they will “learn” to expect a 10 per cent tip.

The element of no-surprise will prompt the waiters’ to dismiss your tip as just another event waiting to happen. And that could lead to a mediocre service!

What, then, should be the tipping model? Studies in neuroeconomics have shown that stable payoff combined with a surprise would be optimal. This would mean offering a standard amount (say, 5 per cent of total food cost) plus an element of surprise.

This is, perhaps, the reason why most salaried professionals are offered a base pay with a variable bonus!

For those who are not so arithmetically inclined, leave the “change” if it is more than, say, 5 per cent of the food bill. Or you could simply leave the “change” with an occasional “bonus”. And at the end, do remember to thank the waiter. That would certainly “insure” a prompt service.

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