Question

Option #2 Consumers Optimization Theory

Consumers go to a restaurant (pretend they are traveling to a place they will never go again) in Miami.  They eat their meal and have received all their benefit from the meal.  What would explain why a consumer may tip after the services have been received?   They expect that they will never be back in Miami, the meal is over, and keeping the tip money would allow them to buy something else.  (Hint: I'm NOT looking for a sociological answer of "it's the cultural expectation to tip."  I want an economic answer)

Answer 1

Case Specifics

A consumer’s satisfaction level which he receives from purchasing a good or a commodity can be described in terms of utils which represent the total utility derived by the consumer from purchasing a particular unit of the commodity.

The theory of utility plays an important part in analyzing this case study. It is long argued, that maximization of one’s interest is paramount in economics of the modern era.

Utils in economics are levels of satisfaction which a consumer gets by consuming a commodity. As he increases the consumption of the same good, the consumer gets lesser satisfaction from the next item. For example a consumer goes on ordering food, then his satisfaction will decrease with consumption of additional units since his stomach is already full.

On the other hand utility is a comparable factor as well. I.e. the utility which one derives from a particular restaurant can be different from that of a different one considering that the purchase was done at a different time.

It is widely analyzed by economists that consumers will pay additional amounts of money, if they believe that the total utility which they have derived from consumption in terms of the satisfaction which they got is relatively higher than previous purchases which they may have made.

Example and Conclusion:-

Now that we know, that utility can be defined by the consumer easily and is quantifiable to the extent that 10 utils are greater than 9, a consumer who is purchasing food in a restaurant and believes has maximized his satisfaction levels can easily leave a tip because of the quality of the food and other aspects such as customer service, ambience of the place etc.

Economically,this happens because consumers are willing to pay more for a service that offers them higher utility even when a repurchase may not take place.

Please feel free to ask your doubts in the comments section if any.