Tip Menus Increase Tips

A Stanford Business researcher found that tip menus in NYC taxi cabs increase the amount people tipped unless the suggestions are too high. Percentages offer options without having to calculate the dollar amount, which seemed to appeal to riders.

In his working paper, Kwabena Baah Donkor theorizes that “the cost of deviating from the norm tip and opting out of the default tip menu are both high relative to the taxi fare.” Typically, people choose conforming and will take the easier path. Both are reasons to select a given tip percentage, assumed to be what others do in a similar situation.

Of course, this research is useful for other tipped workers. Students might consider other applications: in what other contexts could a menu of options simplify decision making and ultimately increase revenue or further business goals?