2. Tipping Types A Study of Statistical Discrimination in Restaurants

3. What We Are Looking At  Statistical Discrimination.  Tipping Behavior in Service Industries.  In particular… the Restaurant Industry. Research Question:  Is variation in tipping behavior consistent with statistical discrimination by restaurant servers?

4. The Literature Tipping Behavior & Statistical Discrimination  Server performance has a significant, but very small, effect on the size of tips (Lynn, 2000).  Two articles by Lynn (2003 & 2004) identify racial groups with tipping averages under the social norm.  Mallinson & Brewster (2005) show stereotypes are often a result of positive self-image and negative other-image.  Caution: self-fulfilling prophecy effect of statistical discrimination (Lippert-Rasmussin, 2007).

5. The Data  Demographic: Roseville, CA.  Unit of Analysis: the host, or person paying the bill, of each table served.  All observations strictly observational.

6. Age and Gender Distribution

7. Racial Distribution

8. Tip Percentage Histogram

9. Hypotheses & Model  H 0 : β x = 0  H a : β x ≠ 0  Where X represents any characteristic theorized to have a significant effect on tipping behavior.  Model: Statistical Discrimination  Y i = β X i + ε i  Where Y represents an unobserved characteristic and X is the observed characteristic.

10. Regression Results

11. Conclusion  Observed characteristics have statistically significant, but very small, effects on tipping behavior.  Considering the low r-squared, unpredictable variations will occur.  Servers should only apply varied service levels on the margin, i.e. when constraints do not allow all tables to receive their highest level of service.