Tuesday, June 9, 2015

Tipping is defecting

Once you're familiar with the prisoner's dilemma game, you start seeing it everywhere.  One thing I argue among my friends is that tipping waiters is a prisoner's dilemma, with tipping corresponding to defecting.

To briefly overview the prisoner's dilemma, it's a game where two (or more) people are given a choice to cooperate or defect.  Defecting is the "selfish" option, in that it leads to more favorable outcomes for the defector at the expense of the "total" good.  It's not possible to sum up multiple people's preferences in a straightforward way (see Arrow's impossibility theorem), but the one thing that's for sure is that if everyone defects then everyone is worse off.

Given the usual association of defection with selfishness, it may seem odd at first to say that giving money away freely counts as defection.  Nonetheless, this is what I claim.  If you live in a culture where everyone tips, and you choose not to tip, then your reputation will take quite a blow.  You may save a little money, but it is not a favorable outcome for you.

And when everyone tips, it creates a tipping culture.  And that makes everyone worse off.

On the waiter's side, it doesn't actually increase pay (since non-tipping wages are simply adjusted to compensate), but rather increases variance.  On a day where the restaurant is understaffed, or where customers are stingier, or where the chef is having a bad day, waiters might earn less.*  It's also not clear why pay should be proportional to meal prices rather than proportional to working hours.

*I don't have any experience, I'm just speculating.

On the customer's side, it makes restaurant prices less transparent.  It increases time calculating bills.  It requires greater use of small change, since it prevents restaurants from charging round-number prices.  And while it might possibly improve waiter service, one wonders why we don't feel the need to give discretionary pay to anyone else.  Perhaps white-collar workers could also be more productive if assigned a boss who assesses the quality of their work hour to hour and pays them accordingly (or not at all)?  Perhaps it would be even better if they had a rotating set of bosses with inscrutable whims?

In short, tipping has a prisoner's dilemma structure, in that tipping benefits you personally but when everyone tips it creates a harmful culture.

I do not mean to say that you should not give tips.  Rather, I would first suggest that sometimes defecting from a prisoner's dilemma is the morally correct thing to do (as I've argued in the past), despite being "selfish" in some sense.  However, it would be nice if there were some top-level action which forced everyone to cooperate.