Uber founder explaining tipping logic. I haven't seen such a precise formulation around the logic for including tipping in e-delivery/PoS platforms.
I'd be curious if someone more familiar with economic theory thinks the statement about economic surplus is correct. And if there's an antidote (or if the cure is worse than the pain). He agrees with another comment elsewhere about increased decision paralysis.
Other countries don't have the same tipping culture and presumably didn't inherit the biases into their e-delivery/PoS platforms.
Tweet:
"Delivery app tipping isn’t about feedback mechanisms.. it’s a tool for maximizing price paid by consumers… eaters are economically irrational with tip, for every $1 in tip, they economically behave as if it were $0.80 (directionally true but hypothetical figure) … this means less price elasticity for the same price… couriers are also economically irrational with tip, for every $1 in tip they economically behave as if it were $1.20 (directional)
The tip is a hack on human psyche which the apps must implement and maximize or miss out on economic surplus that their competitor will use to defeat them.
The app that decides to pay the same net amount to the courier but as a square deal vs a drop fee + tip will lose market share every day to an equal marketplace player that implements and maximizes tip"
big_toast•2mo ago
I'd be curious if someone more familiar with economic theory thinks the statement about economic surplus is correct. And if there's an antidote (or if the cure is worse than the pain). He agrees with another comment elsewhere about increased decision paralysis.
Other countries don't have the same tipping culture and presumably didn't inherit the biases into their e-delivery/PoS platforms.
Tweet:
"Delivery app tipping isn’t about feedback mechanisms.. it’s a tool for maximizing price paid by consumers… eaters are economically irrational with tip, for every $1 in tip, they economically behave as if it were $0.80 (directionally true but hypothetical figure) … this means less price elasticity for the same price… couriers are also economically irrational with tip, for every $1 in tip they economically behave as if it were $1.20 (directional)
The tip is a hack on human psyche which the apps must implement and maximize or miss out on economic surplus that their competitor will use to defeat them.
The app that decides to pay the same net amount to the courier but as a square deal vs a drop fee + tip will lose market share every day to an equal marketplace player that implements and maximizes tip"