Tips, Suggestions, and Nudges…oh, my!

I always thought that 15% was the normal tip for good service. (My wife would argue for 20%, since she waited tables right out of college. She also says that the math is easier to do in her head for 20% vs 15%.) Of course, tipping more for great service is always acceptable. Restaurants have incorporated some behavioral economics concepts to increase tips for the wait staff. On a recent receipt I received, there were tip suggestions, and the math was already done for me! My options were 18%, 20%, 25%, and Other with a check box next to each option.

What is happening here is the Goldilocks effect – the receipt gives you 3 “default” options, none of which is 15%. Having 20% be the middle option of the 3 percentages makes the 20% appear to be the “average” tip that should be used for “average" service. In Goldilocks and the Three Bears when Goldilocks visited the bears’ home one bed was too hard, one was too soft, and the third was “just right.” Same with the bowls of porridge – one was too hot, one was too cold, and the third was “just right.” Having the option of 20% in the middle nudges customers to believe that 20% is “just right."

What is a nudge? The Merriam-Webster dictionary defines it: “to touch or push gently.” Having these 3 options pre-printed on the receipt gently pushes (ie: nudges) the customer to choose one of these options instead of choosing another amount. In behavioral economics a nudge does not force a particular action or restrict choice, but it causes a choice to appear more optimal or easier to select over the others. In this case I would bet that most customers choose the middle option.