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Uber and the Economics of Tipping

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02/20/2015

Remember (Mises U Alum and economist) Ken Zahringer’s great short article about tipping?

Fortunately, CNET noticed, and called Ken up to apply his tipping insights to ridesharing programsFrom the article “To tip or not to tip drivers, that is Uber's question”:

While Uber drivers can earn higher than minimum wage, economist Kenneth Zahringer said that misses the whole point of tipping. Zahringer, who works in the University of Missouri's applied social sciences division, said gratuity in the service industry is more about incentives than income.

"There's the simple fact of getting someone from here to there, but then there's a level of service on top of that, being polite, having a clean car, all of that," Zahringer said. "If the driver knows that this particular guy that's sitting in his car right now might give him more money if he's nicer, he's pretty likely to be nicer."

"It makes the service provider, the individual, a little more of an entrepreneur," Zahringer said. "By improving quality, they can directly affect their income. And that's power."

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for Mises Wire and The Austrian, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

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