Lecture 11

Diner tip provide good service waiter provide

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Unformatted text preview: n inability to make credible threats or promises –  A commitment device changes incenDves to make threats or promises credible •  Various business problems are commitment issues Restaurant Service •  Restaurant wants to provide superior service –  Increases pay of wait ­staff; –  But there is a monitoring problem To Tip or Not To Tip? Diner Tip Provide good service Waiter Provide adequate service Don't Tip Waiter: Diner: $20 $20 •  If wait ­staff are not diligent, restaurant wasted money •  Repeat customers can ensure good service by Dpping •  A one ­Dme, self ­interested diner will not Dp •  Tip is marginal cost •  Service is completed so marginal benefits are zero –  Restaurant cannot insure good service by paying higher wages Waiter: ...
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