Tipping in taxis

 The WSJ writes about a working paper about tipping in taxis by my Stanford GSB colleague (and taxi driver emeritus) Kwabena Donkor.

Here's the WSJ article:

When Given a Menu of Tipping Options, People Tip More  By Lisa Ward

"People tend to use tip menus as a reference point or anchor, interpreting the options as indicators of what they should actually tip, says Kwabena Donkor, an assistant professor at Stanford University’s School of Business, the paper’s author and a former New York City taxi driver.

"The study found that 58% of riders chose to use the taxi cabs’ tip menus, though riders tended to opt out of using the menu when the calculations were easiest."

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And here's the working paper:

The Economic Value of Norm Conformity andMenu-Opt-Out Costs

Kwabena Donkor, Stanford GSB December, 2021

"Abstract: This paper theoretically and empirically analyzes trade-offs between consumption versus norm-adherence and choosing from a menu of default options versus computing a non-default choice. In the theoretical model, peoples’ choices depend on consumption, norm conformity, and menu-opt-out costs. Using passengers’ tips sampled from a billion NYC taxi rides, I empirically estimate the model parameters.I find 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. I then examine the welfare implications of norm conformityand the positive and normative effects of default menu design."