Why do diners tip: rule-of-thumb or valuation of service?

When diners decide how much to tip, is the decision based on social convention or on conscientious appraisal of server productivity? Previous researchers in economics and social psychology are generally inconclusive on this question. A common finding in the literature is that tip size and service quality are unrelated, a result usually obtained from OLS regressions. OLS is only appropriate if service quality is exogenous. It is argued that service quality is very likely endogenous in any regression of tip size; good quality encourages good tips, but server expectations of good tips encourage good quality. This simultaneity is accounted for by jointly estimating percentage tips and customer rankings of service quality on a sample of 247 diners in a Central Minnesota restaurant. Included are explanatory variables consistent with both the social psychology and economic views of tipping. In contrast to previous studies, it is found that service quality significantly affects tip size and when servers expect higher tips, customers rank service quality higher. Also it is found that patronage frequency and coupon redemption have no effect on percentage tips, but server gender influences quality significantly. It is concluded that the results are generally supportive of an economic hypothesis of tipping.     

Portfolio efficiency of a dynamic capital asset pricing model

In the present study we show that, based on equally weighted portfolios of continuously listed Finnish and Swedish stocks, aDynamic Model of Capital Asset Pricing (DCAPM) outperforms the static Capital Asset Pricing Model (CAPM) in the Super Criterion Test. It is demonstrated that the portfolio efficiency of the dynamic model is improved, when using a properly defined transition matrix in the Kalman Filtering Algorithm.The advice and encouragement of Professor Leif Nordberg (Department of Statistics, Åbo Akademi University) is gratefully acknowledged. I thank Jaana Aaltonen for her assistance in monitoring the computer programs. I also thank an anonymous referee for his valuable comments and suggestions for improving the quality of the paper.     

Foreign direct investment and wages in domestic firms in Ireland: Productivity spillovers versus labour‐market crowding out

There is a large literature on the positive spillovers frequently thought to be associated with inward foreign direct investment. Aitken et al. (1996 Aitken, BJ, Harrison, AE and Lipsey, RE. (1996). Wages and foreign ownership: a comparative study of Mexico, Venezuela, and the United States. Journal of International Economics, 40: pp. 345–71 [Google Scholar]) identify several cases, however, where inward FDI appears to have reduced wages in domestic firms. They suggest that this might arise either because foreign firms increase the degree of product‐market competition that domestic firms face, or because they poach the best workers from domestic firms. We concentrate on the second effect, arguing that the first is unlikely to arise in the Irish case to which our data pertain. In a theoretical section we show that the labour‐market poaching effect cannot generate the results postulated if labour markets are competitive and production functions are of the Cobb–Douglas variety, but that it can arise if production functions display higher elasticities of substitution. In an empirical section based on a sample of larger Irish firms we show that, consistent with our theoretical model, foreign presence has different effects on wages and productivity in domestic exporting and non‐exporting establishments.     

Inflation targeting in an import dependent indebted economy

This paper develops a one-sector Kaleckian model of an import dependent indebted small open economy; where the mark-up rate is sensitive to both changes in the interest rate and the exchange rate and foreigners provide part of the long-term finance. The short-run consequences of an inflation targeting policy in the form of high interest rates and strong domestic currency are explored. Among the possible short-run scenarios, the one most relevant for developing countries involves a decline in the profit rate, the capacity utilization rate and the rate of accumulation as well as the employment rate and the real wage. Leverage ratio of the firms and the extent of external indebtedness play an important role in bringing about this result. Long-run analysis reveals that this scenario is associated with instability in the long run and that, also in the long run, the extent of foreign indebtedness and the responsiveness of capital inflows to the return on existing portfolios are important in determining the direction of the effects of inflation targeting on the equilibrium debt–capital ratio.     

Fundraising and Optimal Policy Rules

This paper develops a simple spatial model of fundraising, in which charities select a target population to solicit donations. First, we show that in a competitive charity market without any intervention, the number of charities in the market and/or the overall net funds raised by charities may be suboptimal. Next, we analyze whether a social planner can prevent such shortcomings and show that a regulatory mechanism can be designed to achieve socially desirable outcomes. In contrast to the previous literature, our model does not necessarily produce monopoly as the optimal market structure. We show that if fixed costs associated with establishing charities are sufficiently low, then the optimal market structure is not a monopoly. Given the importance of the trade‐off between the volume and variety of charitable services, we argue that this result may be of particular interest to policy makers.     

The role of psychological and socio-demographical factors for electric bike use in Norway

The electric bike (e-bike) is emerging as a new sustainable transport mode in Norway and has the potential to lead to increased cycling among the population. However, little is known about psychosocial determinants of e-bike use. The aim of the study was to examine the role of normative and environmental beliefs, the perceived attributes of e-bikes, and innovativeness and demographical factors related to e-bike use in a Norwegian sample. An online survey was used to collect data from 910 respondents, including both e-bike users (252) and non-users (658). The respondents were recruited via a commercial panel (response rate 42.04%) and a Facebook post. A structural equation modeling analysis was used to analyze the data. The structural model had a good fit to the data. The results showed that attitudes towards e-bike use followed by innovativeness were the most important predictors of e-bike use. The normative processes measured within the Norm Activation Model activated positive attitudes towards e-bike use, which in turn predicted e-bike use. There was a negative relationship between e-bike and conventional bike use, while a positive relationship was found between car and e-bike use. The results are discussed with regard to their implications for interventions aiming to promote e-bike use.     

Economic diversification of a single-asset tourism city: evidence from Antalya†

It is often argued that the growth of single-asset tourism places is fragile because it is vulnerable to economic fluctuations and is based on specialization and localization economies that lead to an ever stronger lock-in process of path-dependent urban economic development and, in the end, slow growth. In this paper, it is doubted whether a high urban tourism growth implies an ever stronger specialization and an ever stronger lock-in. This paper shows that the growth of tourism stimulates the growth of related and unrelated industries and generates a diversification of the economy, even though some other sectors are crowded out. Antalya (Turkey) is selected as a case-study area not only because its economy is dominated by tourism (it is a good example of a single-asset tourism city), but also because its economy shows a tendency to economic diversification at the sectoral level. This diversification tendency is shown by means of a shift-share analysis and Herfindahl indexes.     

Price Rigidity in Turkey: Evidence from Micro Data

In this study we investigate the duration of consumer price spells and price change patterns for Turkey by employing a comprehensive micro price data covering around 6,000 items over four years. In detail, we analyze how long typical price spell lasts and we investigate the size, frequency, distribution and synchronization of price changes. Compared to advanced economies, a higher frequency of price changes is estimated. Findings suggest substantial heterogeneity among sub-groups in terms of frequency and synchronization indicators. The mixed evidence of both state and time-dependent pricing is also relevant for Turkey, an emerging market economy.