When it’s time to pull out your wallet, what factors influence how you tip? Research by University of Michigan School of Information uncovers that people are influenced by default tip values, societal expectations of a “normal” amount, and the willingness to do mental calculations while settling a bill. 

Previous studies have shown default options can sway people’s actions. “Whenever you have a decision and you provide a default for people — whether that is default into this 401k option, or organ donation — that influences behavior,” says Hanna Hoover, research fellow and author of the paper in Journal of Economic Psychology. 

This also occurs with lower-stakes interactions, like coffee shop visits and taxi rides. When the tip screen pops up during digital payments, the default choices can play an important role in influencing how much people tip. 

But Hoover wanted to understand the reason why the defaults influence behavior. 

She turned to a well-documented, multi-year record of tip data: NYC taxis. “New York City has really awesome open data laws,” says Hoover. Information from the Taxi and Limousine Commission is publicly available, including payments, tips, and in which area a ride started and ended.

She looked at all NYC taxis that used credit vendor services between 2010 to 2011. The two main taxi technology vendors collected tip data. During the study period, one vendor increased default tip suggestions from 15, 20 and 25 percent to 20, 25 and 30 percent. This change allowed Hoover to see a difference in average tip amounts with a changing default. 

In addition to payment and tip amounts, Hoover also looked at ride location data. In particular, it allowed her to see if rides were between residential, manufacturing or commercial zones. 

“If you’re going to take a ride to work from a New York City residential zone, you’re probably a resident,” she says. But if a person took a ride to a place that was a known tourist destination, like the World Trade Center, Coney Island or Broadway, this indicated that at least some of the riders might not be local, especially if the ride did not originate in a residential area. 

Hoover looked at two types of motivators in selecting the default tip suggestion, cognitive costs and implied indirect endorsement, to understand how they influence behavior. With cognitive costs, the effort of reasoning out how much to tip may take a backseat to the ease of choosing a default amount. “People who face higher cognitive costs might be people who are taking cabs late at night,” says Hoover. “They are probably more tired or they might be drinking alcohol.” 

Indirect endorsements can be thought of as social norms, says Hoover. For example, people understand that restaurant dining usually has a 20 percent tip for service. When paying for service, people tend to stick to the “norm,” not wanting to tip too much or too little. 

The idea of a tip “norm” also occurs for taxi rides. “If you're a resident, and you're like, ‘Oh, I take taxi cabs all the time, I know what the social norm is for a tip,’” she notes. Tourists, on the other hand, may take cues about normal tip amounts from the default values presented on the payment screen. 

She found that passengers who took late-night rides were 33 percent more likely to stick with the default tip option when it came time to pay. Passengers traveling to and from tourist destinations were 35 percent more likely to tip above the average manually-entered tip when presented with increased default amounts. 

Non-residents increased tips when presented with higher defaults; NYC residents were also  influenced. “Residents still increase their tip amount with higher defaults, but not as much as everyone else,” says Hoover.

These findings could be helpful for user experience (UX) designers. For example, default options could change based on the type of rider. “We can change the interface depending on things like where you pick someone up (a popular tourist destination or a residential area) or time of day,” says Hoover. 

— Sarah Derouin, UMSI public relations specialist

RELATED: 

Learn more about research fellow Hanna Hoover. 

Read the paper “Nudges as norms: Evidence from the NYC taxi cab industry” published in Journal of Economic Psychology.