Radiohead's Warm Glow (or how economists don't understand tipping)(nytimes.com)
nytimes.com
Radiohead's Warm Glow (or how economists don't understand tipping)
http://www.nytimes.com/2007/10/14/opinion/14sun3.html?ex=1350014400&en=304f58c7e0c1a3a2&ei=5090&partner=rssuserland&emc=rss
4 comments
It's a bit more complex than that though...
You have to consider that your actions won't change the overall situation much, unless you paid hundreds of dollars for the album. So, whatever happens will happen with or without you paying. From that point of view, you might as well save your money, no?
Of course, if everyone thought that way, things would go differently, and the experiment would fail. So, yes, homo economicus is too simple, but does provide food for thought.
I'm a lot happier with restaurants in Italy, where there is no tipping. You pay a fair price for the meal, and that's that. Most of the time you get good service, sometimes you get bad service, but not out of proportion to how things are in the states or here in Austria. And the food is way better in any case:-)
You have to consider that your actions won't change the overall situation much, unless you paid hundreds of dollars for the album. So, whatever happens will happen with or without you paying. From that point of view, you might as well save your money, no?
Of course, if everyone thought that way, things would go differently, and the experiment would fail. So, yes, homo economicus is too simple, but does provide food for thought.
I'm a lot happier with restaurants in Italy, where there is no tipping. You pay a fair price for the meal, and that's that. Most of the time you get good service, sometimes you get bad service, but not out of proportion to how things are in the states or here in Austria. And the food is way better in any case:-)
not much of a difference, maybe. But by the same logic, I did not pay very much. It is not like I gave them half of my income or something. So I might as well pay. I am not saying that it would be irrational to pay nothing, but to say it is weird that anybody choses to pay at all is too much.
I also like it better without tipping, and granted, it would also work if people just stay away from restaurants with unfriendly waiters.
I also like it better without tipping, and granted, it would also work if people just stay away from restaurants with unfriendly waiters.
Tipping is just a corner case of supply and demand, where the good being demanded is supply.
excellent article. nice hope for the future
thx
It's guilt. People tip cab drivers and pay for music because of guilt. It's funny though, I feel guilty stiffing a waitress but not for downloading the album of my favorite band for free.
I think it's more about being fair.
I think one of Co-opetition's (http://mayet.som.yale.edu/coopetition/index.html) main ideas has it nailed. While this doesn't involve business competitors, it's still about players of a game giving up maximizing their own individual gains, to share it with one another
in this case we can think of the consumer as a player of a game where they have three general choices:
a) maximum gain - pay nothing (assuming they don't buy anything else from RadioHead; Radiohead loses big) and enjoy the music
b) minimal gain - pay what they think is full price (buy extra stuff, ...) and enjoy the music
c) mixed gain - pay what they think is a discounted price (less than a cd) and enjoy the music; neither Radiohead nor the consumer maximize their gains in the short term but both of them benefit moderately. Radiohead has an incentive to keep publishing hits and the customer can keep enjoying them (without being robbed by the record industry).
I think one of Co-opetition's (http://mayet.som.yale.edu/coopetition/index.html) main ideas has it nailed. While this doesn't involve business competitors, it's still about players of a game giving up maximizing their own individual gains, to share it with one another
in this case we can think of the consumer as a player of a game where they have three general choices:
a) maximum gain - pay nothing (assuming they don't buy anything else from RadioHead; Radiohead loses big) and enjoy the music
b) minimal gain - pay what they think is full price (buy extra stuff, ...) and enjoy the music
c) mixed gain - pay what they think is a discounted price (less than a cd) and enjoy the music; neither Radiohead nor the consumer maximize their gains in the short term but both of them benefit moderately. Radiohead has an incentive to keep publishing hits and the customer can keep enjoying them (without being robbed by the record industry).
You nailed it. Because we live in a society whose rules we'd like for the most part to uphold, we impose norms on ourselves and on others. Fairness is among the most important of those, and it's the foundation of many others.
Check out the Ultimatum game (http://en.wikipedia.org/wiki/Ultimatum_game) for another example of the same desire to keep people's dealings fair.
Check out the Ultimatum game (http://en.wikipedia.org/wiki/Ultimatum_game) for another example of the same desire to keep people's dealings fair.
Although we're not entirely there yet, I think the 'socialization' of the web has begun to pave the way for online tipping. As we begin to see the people through the content, we will become more apt to support them in order for them to keep supplying the content we enjoy.
The difference is perhaps that the band's marginal cost of serving you was basically zero, whereas for a waiter or a cab driver it was significant.
while digitized songs scale better than food or driving services, i'm not so sure that the cost of delivering it is basically zero
Well, just going by S3 rates, a 5MB song costs $0.0009 to deliver.
well it took years to build their fanbase with previous albums and touring; and I could be wrong but I think both recording an album and touring around the world have significant costs in both time and money which don't always result in fruition (big risk). Luckily it worked out for radiohead
That's why I was careful to specify marginal cost. What you're discussing is fixed cost.
you have me there - i just felt that you were making light of their fixed/sunk costs
[to be fair - I didn't specifically mention marginal costs in my arguments =) hehe ]
[to be fair - I didn't specifically mention marginal costs in my arguments =) hehe ]
As well as create a successful startup. That's not the point.
It's a product not a service, so they work the same if their album is downloaded a hundred or a million times.
It's a product not a service, so they work the same if their album is downloaded a hundred or a million times.
1.) I want radiohead to make more albums, so I wanted to show them that it is worth doing so. 2.) I want to hurt the RIAA (and other evil players) by showing them that they are not necessary anymore. Ideally, the success of the inrainbows scheme would lead to copycats, meaning more cheap and free music for me.
I think those reasons are perfectly rational. It pisses me off (sorry, but really!) if wannabe economists claim that rational beings should pay nothing.
Nor is tipping very puzzling: it guarantees that I get a friendly waitress in the restaurant, because if she is treating me badly, there will be no tip. OK, you have to think around several corners (ie pay it forward) to realize that, but the whole society works that way. It is not an impossible train of thoughts. If I don't tip, my fellow humans will suffer (angry cab driver), so if they hear about it, they will punish me. I think in the US waiters even come after you shouting if you don't tip.