Gelf Magazine - Looking over the overlooked

Food | Science

June 1, 2007

Money-Grubbing

An interview with the scientist who demonstrated that splitting a restaurant bill reveals people's innate greed.

Hadley Robinson

What's the best way to split a restaurant bill? Should each diner pony up personal costs, taking into account tip and tax? Or is it better and easier to just split the check evenly?

A study conducted back in 2002 at the Technion in Israel tested that question. The research resurfaced on a recent post on Meganut complaining of the unfairness of paying for somebody else's expensive drinks and fancy appetizers while personally making modest choices. One reader included a link to the Technion study "The inefficiency of splitting the bill: A lesson in institution design."

Uri Gneezy
"In Germany, they count down to the last penny. In Israel, it's not a good way to go around. You'll get a very bad reputation."

Uri Gneezy

Researchers asked gender-balanced groups of six strangers to come to a restaurant. The participants had to write their orders on paper and could not interact with the others while making decisions. Instructions for how the group would pay were clear at the beginning of the meal. Four groups were told they would be paying individually; four groups were told they would split the bill evenly; and two groups were told the meal was on the experimenters.

The finding: How you're going to pay directly affects what you order. Research subjects chose the cheapest grub when they were paying individually. When splitting the bill evenly, they ordered pricier items. When paying nothing at all, their consumption went up even further.

Gelf caught up recently with Uri Gneezy, one of the three economists who conducted this experiment. Gneezy is now a professor of economics and strategy at the Rady School of Management at the University of California, San Diego. We talked about his own experiences with bill splitting, how his branch of economics assumes people are selfish, the importance of social norms, and why the study cited an episode of Friends. This interview was been edited for clarity.

Gelf Magazine: Why did you do this study?

Uri Gneezy: We were interested in how incentives influence behavior. The way you split the check actually affects what you order. It is a nice demonstration of negative externalities. When I consume something and smoke is produced, we call that negative externalities in economics. In this case, the fact that I consume more has some externality—it has some effect on you based on the additional cost that you have to pay for it.

GM: What are your own experiences with bill splitting?

UG: Bill splitting is an interesting experience. I go to a restaurant and I don't want to eat much and other people order a lot. It's not a nice feeling. Or when I'm out with students, I fortunately have enough money that I can eat a nice dinner. But the students do not, so I feel awkward. It's also kind of funny to go to a restaurant and work it out individually. That's also not a nice feeling, either: "You ate $2 worth of food more than I did and you should pay more." The advantage for splitting the bill is it saves time and energy. The disadvantage is some people take advantage of you.

"People are selfish in our study, just like the traditional economic theory predicts."
GM: So it matters if there is a large disparity in income within the group?

UG: I think that's a very important part of it. Either you have different amounts of money or different tastes. For example, some people really care about wine. With wine, it can get very expensive, and I don't want to pay for your expensive wine. Why do I have to pay for it? I think that's something we observe quite a lot.
It's also the case that our results were done with strangers. I think it's different with friends who will meet with each other again and again. You know it's going to come back. If I over-consume today, you're going to get me tomorrow.
Let's say you like dessert wines. A glass goes for $15. You'll be more careful, maybe, when you're going to be alone than when you're going to split between 10 people. The bigger the group, the less you're going to care about it.
Going out with students, everybody is going to see what you eat. When I go in conferences with students and I want to have fun and have a glass of wine, even if it's just for lunch, and it's just six more dollars, for them, $6 can be a lot of money. It's awkward with the bill. Social norms are important.

GM: Your research subjects didn't know each other. Why would it make a difference if you were with friends or more familiar people? Because you care more about them?

UG: I don't think it's because you care more, but because you know you can get away with it once, but next time you eat with him he'll eat the lobster and you'll have the hot dog. You'll pay for it later on. That's why I expect it to be different with people you know well. It's not that you don't care about your friends, but it's less of an issue.

GM: Speaking of friends, do you know of any other studies that cite the show Friends?

UG: No, I don't. It's a very nice example, I think. Basically some of them have much more money than the others and they just want to go out and have fun.

GM: What are the social implications of the results?

UG: In economics there is a big discussion about negative externalities: How my behavior negatively affects your well-being. Traditional economic theory assumes people are selfish. Then there is a new line in economics that shows that this is not the case and that many times people do care a lot about others. Some of the lab findings out there claim we do think about others when we make decisions. That may be true in the lab, but that is not what we are finding when we go out in the field. The evidence we find of this is very limited. Negative externalities are important in the real world. What we care about is less about the restaurants; it's more about the principle. Our study shows the principle is important. People are selfish in our study, just like the traditional economic theory predicts. The people in the study did not know the purpose of what we were doing.
I think we show that there is more to the original economic theory than new experiments claim: that people are in fact selfish and react strongly to economic incentives.

GM: Have you done other studies on this?

UG: I'm doing behavioral economics. I have a bunch of studies like this. It's a productive kind of research. I think it's a very active research area.
Here's an example of another study: Imagine that you have kids in a daycare and you need to pick up kids before 4 pm in the afternoon. Parents tend to come later and later, and the teacher wants to improve on that, so she gives a fine to parents that come more than 10 minutes late. The fine was about $2 in Israel for coming late.
Before that, the social norm was to be on time, but when we made it some sort of market transaction, it became OK to be late. People think, "OK, if I'm late, it costs $2. I'm not violating social norms by being late." The effect of the fine was to make more parents come late. Before it was, you don't come late to pick up your kids. Good people don't come late. Now, suddenly if you pay $2, then it's fine to be late. You put a price on the social norm and the social norm is much weaker than it was before.

"You say, 'I don't want to be a sucker and get stuck with a hot dog and pay for a lobster. If you're going to have fun, I should also have fun. I'm going to pay for it, anyway.' "
GM:How do these two experiments work together economically?

UG:All around the importance of social norms in the real world. We know very little about social norms. We know intuitively that fairness is important. Every child can tell you that social norms are important, but how does this affect economic behavior? We know very little. Those are two examples of studies that tried to look at these connectors.

GM:What is the social norm in the restaurant scenario?

UG:The social norm would be if I'm doing something that's going to affect you, I should take it into account. I shouldn't be selfish. You go out to dinner with friends, you hope they won't change what they consume just because you are going to pay part of it. It wouldn't be fair. The social norm is to think about others when you consume.
How important are selfish incentives in real everyday interactions? Is it really something we can ignore as economists or should we look at this in the real world? Sometimes people care a lot about social preferences, but when you go to the financial market, people care about it much less.
In the restaurant, in the workplace, when you talk with your friends and with your kids, then you care about social preferences. But to what degree does that change your economic preferences?

GM:What variations might there be in behavior based on geography, age, culture, or anything else?

UG:I think age is important in that older people have more money. In that respect, it is a bit different and even the social norm could be different in age groups. It might be that when my daughter is with a group they always split the bill, but when I go out with friends, we don't.
Also, culture can matter. In Germany, for example, they count down to the last penny. In Israel, if you do this, it's not a good way to go around. You'll get a very bad reputation for calculating up to the last cent. The cultural issue is very important.

GM: By bad reputation you mean that they'll think you're cheap?

UG: Yeah, exactly, like you're a cheap guy who would care about stupid things like the last 10 cents.

GM: Do people consume more because they may think that's what other people are doing and don't want to get cheated?

UG: We made sure that when they order they don't know what the other person orders. Even if you just order sequentially, you say, "I don't want to be a sucker and get stuck with a hot dog and pay for a lobster. If you're going to have fun, I should also have fun. I'm going to pay for it, anyway." In that case, both of us are overspending in order to just neutralize the effect.

GM:Did the study leave you with any more questions you wanted to pursue?

UG:There are some open questions, but we left it for someone else to pursue. Like, what happens if you know the other people more or less? There's the cultural question. There are many open and interesting questions.

Hadley Robinson

Hadley Robinson is a Gelf contributor and a staff writer for the
Webster Times.







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Comments

- Science
- posted on Jul 08, 13
MisChef

"I don't want to be a sucker and get stuck with a hot dog and pay for a lobster."

I want to know what kid of restaurant serves both hot dogs and lobster?


Article by Hadley Robinson

Hadley Robinson is a Gelf contributor and a staff writer for the
Webster Times.

Learn more about this author






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