Restaurants have observeed that large parties(eight or more) leave a lower average tip than smaller parties.?
Answer:
This is known as the free-rider effect.
The idea is that with, like some other answerers have said, with a larger group of members, responsibility is more spread out, and people feel like they can get away with less contribution.
Here's an example:
Consider a neighborhood of 10 houses that suffers from flooding amounting to $500 for each house. Let's say there is a levee that could be installed to prevent flooding for $1000 total. If the cost were distributed evenly, that would be only $100 for each house, which is much less than the $500 they suffer because of the floods. Seems like this problem should be a no brainer, right?
Well let's say that one of the houses decides not to pay, knowing full well that if he doesn't pay, the other houses will pick up the slack; $1000 nine ways is still only $111, still much less than the $500 in damages if they don't buy it. This house that does not want to pay becomes the "free rider," who will receive full benefit (the levee will be built) but will pay nothing or at least less, and instead rely on other people to pick up his or her slack.
To understand why the problem gets worse with more people involved, let's consider the same scenario as mentioned above but with only 3 houses sharing the costs, and flooding only costing $400. If the costs were equally distributed, each house would pay $333. If one person tries to weasel out of payment, however, the cost would be $500 per house, which is more than the $400 of flood damages, and thus the levee won't be built. The free rider effect cannot occur in this situation.
Hopefully you can understand this a bit better.
people are assholes when traveling in groups... and probably because they are preoccupied with each other, they forget about the waiter/waitress...
Well consider:
If one person eats at a restaurant and the bill is $20 a 20% tips is $4 dollars.
Now consider 8 people eating the same meal. The total cost is $160 and the same 20% tip is now $32 dollars.
Leaving 32 dollars on a table for service appears like too much money. After all it is more than the price of one person's meal. The perception is that the tip is excessive even though it is the same percentage.
The same can be said about any kind of large scale agreement. A tax break of $10 per person wont make a difference to the individual. But collectively, the result is 2.5 Billion dollars (assuming a population of 250 Million people).
Well, this would require some fairly involved statistics research and analysis. But, off the cuff I can say that typically parties larger than 6 have a tip of 15% automatically included. This automatic tip could potentially be lower than what the group was intending on tipping.
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