By Quentin Fottrell, MarketWatch
Most people are comfortable with skimping on tipping their Uber driver.
That’s the conclusion of a working paper released this week , co-authored by University of Chicago economist John List and published by the Becker Friedman Institute for Economics at the University of Chicago. Uber customers tip on just 16% of rides, the paper concluded after analyzing 40 million rides. However, the average tip is $3.11, or one quarter of their fare.
Gender also interacts with age, with men tipping younger women more than they tip any other group. Drivers in cities who, presumably, are less likely to see their driver again tipped less.
“Women are tipped more than men, and men tip more than women do,’ the authors of the study wrote. “Gender also interacts with age, with men tipping younger women more than they tip any other group.” Drivers in urban areas who, presumably, are less likely to see their driver again tipped less, they added. The higher quality of the ride, the more people tip.
The results support the theory that giving people a selection of suggested tips impacts how much they’ll tip and whether they’ll tip at all. “In particular, higher default options tend to lead to higher tip levels on average, but they also lead to a higher percentage of trips that do not get tipped at all,” they wrote. “This result is consonant with the tipping literature that argues social norms drive tipping.”
Uber riders are less likely than taxi-cab customers to tip more when faced with default tipping options. Uber riders are given the option to add a suggested tip only after they get out of the car.
When the tipping decision is made privately, however, defaults play less of a role in the tipping decision, the study concluded. Average tips as a percentage of the fare increased by just 2.5% between the lowest and highest default options. However, previous research has shown that providing customers with options increases the average tip in taxi cabs by 10%.
“The strength of social nudges, or any particular course of action brought about through social norms, is diminished without public verification of an action,” the UChicago study found. Customers may be more likely to tip more to avoid feeling awkward or stingy for the few moments it takes them to exit a taxi cab. Uber customers are prompted to tip after they have gotten out of the car.
Also see: Is this the worst tipper in America?
Here’s what else the study found:
• Some 60% of ride-share customers never tip, while only 1% always tip.
• Men tip on 17% of trips, while women tip on 14.3% of trips.
• Women drivers are tipped up to 12% more than male drivers.
• But men and women drivers aged 65 and over are tipped at the same rate.
• Uber customers tip better from 3 a.m. to 5 a.m., and on Fridays and Saturdays at 6 p.m.
• Riders with 5-star ratings tip more than twice as often as those with 4.75-star ratings.
Millions of drivers now serve the ride-share market, the authors said, “and debit- and credit-card data suggest that by 2018 as many as 43% of American adults tried ride-share at least once.” The paper examined UberX trips from Aug. 18, 2017 to Sept. 14, 2017, and analysis was restricted to six cities: Chicago, Boston and San Francisco (as three large cities in different regions); Salt Lake City and Asheville, N.C.; as well as college town Bloomington, Ind.
Uber customers tip on just 16% of rides, he concluded, after analyzing 40 million rides. However, the average tip is $3.11, approximately one quarter of their fare.
“Field experiments provide an empirical look at consumer behavior that wouldn’t be possible otherwise,” said List, the Kenneth C. Griffin Distinguished Service Professor of Economics at UChicago. “In this case, we found clear differences in tipping behavior informed by environmental and demographic factors, such as gender, age and race.”
“In addition, we were able to go beyond simple measurement and answer the ‘whys’ behind tipping,” he added, according to a statement provided by the University of Chicago. “In so doing, we can provide a unique glimpse of social preferences in the field and provide insights into how norms and defaults work in tandem to change behaviors.”
The paper was co-authored by economist Uri Gneezy of the University of California, San Diego; UChicago alumni Bharat Chandar, currently a doctoral student at Stanford University; and Ian Muir, who now works at Lyft /zigman2/quotes/208999293/composite LYFT -5.38% , and is a former Uber /zigman2/quotes/211348248/composite UBER -8.85% employee who still retains equity in that company.
“Even though social preferences affect nearly every facet of life, there exist many open questions on the economics of social preferences in markets,” they wrote . “We leverage a unique opportunity to generate a large data set to inform the who’s, what’s, where’s, and when’s of social preferences through the lens of a nationwide tipping field experiment on the Uber platform.”
Similar to the Uber study, other research suggests that older people tip more. Over half of Americans aged 65 and over tip 20% or more at restaurants, the highest of any age group.
Previous research suggests that older customers are often the most generous tippers, especially when it comes to ride-share services. “Give as if you were taking,” Hisham Matar, the Pulitzer Prize-winning author of the memoir “The Return,” said his late father advised him. But not everyone follows that rule when dealing with members of the service industry, according to separate research.
Similar to the Uber study, other research shows that older people are more likely to tip more. More than half of Americans aged 65 and over tip 20% or more at restaurants, the highest of any age group, a recent survey released by CreditCards.com found. Women are better tippers than men and baby boomers are more generous tippers than millennials, according to the survey.
Nor does it matter whether it’s an Uber ride or a food delivery: Older Americans appear to be more generous tippers. Baby boomers are more likely than millennials to tip restaurant servers and taxi or ride-share drivers (63% versus 40%), hair stylists (73% versus 53%), food delivery (72% versus 56%) and hotel housekeepers (33% versus 23%).
The default tips on Uber nudge people to tip, something the latest study found is not yet a social norm. When people are unsure whether or not they should leave a gratuity, they often don’t tip.
Why the differences? “Conventional wisdom says that if you have more money, you tip more,” said Ted Rossman, an industry analyst at CreditCards.com. “So maybe boomers have saved more money, or they have higher salaries if they’re still working.” For many people, tipping is a source of anxiety, he added.
The default tips on Uber nudge people to tip, something the latest study found is not yet a social norm. When people are unsure whether or not they should leave a gratuity, they often don’t tip. Case in point: More than half of U.S. adults (53%) said they give their kids’ teachers or child-care providers holiday tips at least on occasion, the CreditCards.com survey found. But a majority of people said they never give their trash/recycling collectors or mail carriers holiday gratuities.