Can someone help with this econ question? Just tell me what it means? Im lost :-(?

Question

Restaurants have observed that large parties (eight or
more) leave a lower average tip than smaller parties.
Identify the effect, which also makes it more difficult
to reach global environmental agreements, responsible
for this phenomenon.

Answer 1

Hello, I once read an essay called "The Tragedy of the Commons". It began with a description of the situation in sub-Saharan Africa where individuals and families all graze their herds on common grazing land and/or grassland that is held in common by all. The effect is that the land becomes over-grazed to extinction, i.e. worthless desert, because each individual family has no incentive to conserve, and any attempt to conserve resulting in more grass to graze upon will just be snapped up by multiple other neighbors and their grazing animals. If everyone could agree to conserve, then there would be more grass and thus more wealth for everyone, but without a totalitarian government enforcing the conservation, the temptation is always there to cheat a little and take a little more than you are entitled to, leading to total destruction for all. One possible way to solve this problem is to divide the grazing land up into individually owned parcels, and individuals will then take excellent care of their own grazing resources, and not allow them to be ruined by over-grazing. Another way to solve the problem is to erect a strict Nazi like government that comes down hard against cheaters.
The bottom line is that it is either preferable to have individual ownership of resources, or else there needs to be a draconian non-corrupt government in place to prevent abuses and cheating. Otherwise, any resource held in common will be needlessly and recklessly squandered. This is human nature.
I believe your Economics homework is along similar lines. The Earth's atmosphere, after all, is something that we all hold in common, as an example. I hope this helps.

Answer 2

I think this effect is the free-rider effect, a problem that usually occurs when property rights are unclear.

In the restaurant example, responsibility for the tip is shared by more and more people, thus it's easier for someone who should tip, let's say, $3.40, to sneak away with only $3, and be somewhat of a "free-rider" on the tip. The tip amount seems substantial, and the $0.40 negligible, but there is thus incentive for everyone to round-down, and the overall tip will have a lower percentage than if there were only two people dining. Again, with the two-person scenario, they feel much more responsible for the tip (and also accountable by their server if the tip is too small). With larger parties it is more difficult for the server to, let's say, identify who is the free-rider.

Answer 3

It seems to me that the effect they're talking about is the decreased sense of responsibility that people feel when in a large group. They think that others will pick up their slack, but at the same time, no one wants to compensate for someone else's deficiency.