Azar, Ofer H. and Tobol, Yossi (2006): Tipping as a strategic investment in service quality: An optimal-control analysis of repeated interactions in the service industry.
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We present an optimal-control model where tipping behavior creates reputation that affects future service. Tipping and reputation can evolve in four path prototypes: converging to an interior equilibrium; converging to minimum tips and reputation; and two prototypes that start differently but end with tips and reputation increasing indefinitely. Analyzing the interior equilibrium suggests that when reputation erodes more quickly (capturing lower patronage frequency), equilibrium reputation is lower. Interestingly, however, tips may be higher. Increasing the minimal tip raises tips by the same increase, and does not change reputation. A more patient customer leaves higher tips and reaches a higher reputation.
|Item Type:||MPRA Paper|
|Institution:||Ben-Gurion University of the Negev and Bar-Ilan University|
|Original Title:||Tipping as a strategic investment in service quality: An optimal-control analysis of repeated interactions in the service industry|
|Keywords:||Tipping; Service Industry; Behavioral Economics; Social Norms; Service Quality|
|Subjects:||C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C61 - Optimization Techniques; Programming Models; Dynamic Analysis
Z - Other Special Topics > Z1 - Cultural Economics; Economic Sociology; Economic Anthropology > Z13 - Economic Sociology; Economic Anthropology; Social and Economic Stratification
D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory
L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports; Gambling; Recreation; Tourism
|Depositing User:||Ofer Azar|
|Date Deposited:||08. Aug 2007|
|Last Modified:||20. Feb 2013 10:20|
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