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Studies in restaurants show that the tips left by customers who pay th

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Re: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 03 May 2018, 16:44
1
adkikani wrote:
GMATNinja VeritasPrepKarishma

Quote:
So now imagine you are in a restaurant. The bill is $50, and you have $100 cash in your pocket. You decide to leave a 10% tip ($5). But then you notice the credit card logo on the bill tray. This reminds you of the shiny American Express CC in your pocket, and that card has a $5,000 credit limit. You are reminded that your spending power exceeds the $100 cash that you have. So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.


Does not the argument and your example need to have an implicit assumption that:
the bill amount (including tip) I need to pay and the cash I have in my pocket needs to be equal?

Why is highlighted portion crucial?
I do have still $50$ more in my cash pocket to pay $7 instead of $5
after paying bill of $50 without tip?

Would (E) be the correct choice if it said:

The percentage of restaurant bills paid with credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.

The highlighted portion is important because it relates the tip amount to your spending power. Without the credit card, spending $5 on the tip lowers your perceived spending power from $50 to $45... true, you still have some cash, but you are aware that your balance is getting closer and closer to zero so you might not want to leave a larger tip. However, if you have a credit card with a $5,000 limit, now that $5 tip only represents a tiny fraction of your perceived spending power.

This is what was meant by the sentence after the highlighted portion:

    So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.

arvind910619 wrote:
Hi GMATNinja

Great explanation as usual .
I have one more possible reason to reject E .
People have multiple credit cards so this choice is irrelevant .
Please share your thoughts on this .

Thank you for the kind words, arvind910619! And yes, (E) has to do with people choosing one brand of credit card over the other, which is irrelevant to the hypothesis.

adkikani, if (E) is changed as you suggested, it still doesn't tell us anything about tip amounts, so it would still be irrelevant.
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Re: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 04 Aug 2018, 03:29
GMATNinja wrote:
The passage itself is pretty straightforward:

  • We have the results of the studies: "the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo." - notice the use of the word "tend". The psychologists are not suggesting that seeing a credit card (CC) logo on the tray will ALWAYS cause an increase in tip amount. In general, seeing a CC logo results in higher tip amounts.
  • And we have an interpretation of those results: "simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available." - notice that this hypothesis only mentions "credit-card holders"

What the heck does that mean? Well, if you have $100 cash in your pocket and don't have any credit cards, then your "spending power" is limited to that cash amount. If you walk into an electronics store and want to buy a fancy television for $1,000, you'll be out of luck.

But what if, in addition to the $100 cash, you have a CC with a $5,000 spending limit? Now your spending power exceeds the amount of cash in your pocket. Sure, you'll have to pay off that credit card in the future, but right now you can walk into that electronics store and buy FIVE of those fancy televisions! The credit card does not actually give you any money, but it certainly increases your present spending power.

So now imagine you are in a restaurant. The bill is $50, and you have $100 cash in your pocket. You decide to leave a 10% tip ($5). But then you notice the credit card logo on the bill tray. This reminds you of the shiny American Express CC in your pocket, and that card has a $5,000 credit limit. You are reminded that your spending power exceeds the $100 cash that you have. So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.

Reminded that you spending power is not limited to the cash, you might decide to leave an even larger tip (maybe $7-10 instead of $5).

Now that we understand the psychologists’ interpretation of the studies, we need something that supports that interpretation:


Quote:
B. Patrons who are under financial pressure from their credit-card obligations tend to tip less when presented with a restaurant bill on a tray with credit-card logo than when the tray has no logo.

According to the psychologists, customers tip more when they are reminded that their spending power exceeds the cash they currently have available. If this is true, then we would expect customers to tip LESS when they are reminded that their spending power is LESS than the cash they currently have available.

Huh? Well, think about a man who is in debt. He might have $100 in his pocket, but he owes his friend $500. He might have been ready to give a $5 tip, but as soon as he remembers that he owes money, he decides to give $3-4 instead.

Although choice (B) presents a scenario that is the opposite of the one presented in the passage, both scenarios support the same theory, which is that being reminded of your spending power can impact how much you tip. Generally, this causes people to tip more because they are reminded that their spending power exceeds the cash they have. However, for people in credit card debt, seeing the logo is a reminder that their spending power is actually lower.

So if choice (B) is true, it would support the psychologists' hypothesis. Keep this one.


Dear GMATNinja, your explanation is excellent,

would you please elaborate further because i have a question that seems not be discussed.
the conclusion states a causation that simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available.
what we need to strengthen the conclusion is something that make the conclusion more likely valid.
i read a lot of discuss, almost points out a theory, which is that being reminded of your spending power can impact how much you tip., as you mentioned above.


I am not sure what i missed, how can i grasp the theory? does the conclusion state causation between more remind,more powerful, and more tips?
I understand B states an oppoiste the theory, it supports the general theory, while the arguments does not state a general theory, it concludes a causation between more remind, more powerful, more tips.

it confuses me a lt.
Please help,

Hi mikemcgarry, GMATNinjaTwo, MagooshExpert Carolyn,
sayantanc2
VeritasPrepKarishma

if you experts are available, please suggest.

Thanks in advance
Have a nice day

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Re: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 23 Aug 2018, 08:40
zoezhuyan wrote:
would you please elaborate further because i have a question that seems not be discussed.
the conclusion states a causation that simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available.
what we need to strengthen the conclusion is something that make the conclusion more likely valid.
i read a lot of discuss, almost points out a theory, which is that being reminded of your spending power can impact how much you tip., as you mentioned above.

I am not sure what i missed, how can i grasp the theory? does the conclusion state causation between more remind,more powerful, and more tips?
I understand B states an oppoiste the theory, it supports the general theory, while the arguments does not state a general theory, it concludes a causation between more remind, more powerful, more tips.

it confuses me a lt.

I don't think you've missed anything. :) Instead, you may be trying to link too much together in your identification of the conclusion.

The author concludes that seeing a logo makes many credit-card holders tip more because it reminds them of their current spending power. The key link is between seeing the logo and remembering whatever their level of spending power is. As we see with choice (B), some credit-card holders could then remember that they have no spending power, and ultimately tip less. This still supports the conclusion because seeing the logo caused the card holder to think about spending power and incorporate those thoughts into their tip amount.

Furthermore, we don't need to reach for a "general theory" because the argument focuses on many credit-card holders. We just need to support the conclusion as it applies to that population.

I hope this helps!
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Studies in restaurants show that the tips left by customers who pay th  [#permalink]

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New post 10 Oct 2018, 23:22
GMATNinja - I understand this questions is already discussed a lot and all aspects are covered. Your explanation followed by eGMAT note [both] isgreat. More I read , more I am getting closure to answer but sometime getting confused as well.

One of the question in my mind is , per option B , if CC holder pay less because of his CC obligations or pressure then if I club this with passage content then consider a case when CC holder is paying by cash, he get a tray with CC logo and he is already in CC debt then he will not tend to pay more tip. And so this case is not helping me strengthen my belief.

Thanks - NA
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Re: Studies in restaurants show that the tips left by customers who pay th  [#permalink]

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New post 24 Oct 2018, 11:59
1
NAvinash wrote:
GMATNinja - I understand this questions is already discussed a lot and all aspects are covered. Your explanation followed by eGMAT note [both] isgreat. More I read , more I am getting closure to answer but sometime getting confused as well.

One of the question in my mind is , per option B , if CC holder pay less because of his CC obligations or pressure then if I club this with passage content then consider a case when CC holder is paying by cash, he get a tray with CC logo and he is already in CC debt then he will not tend to pay more tip. And so this case is not helping me strengthen my belief.

Thanks - NA

Choice (B) strengthens the argument because it strengthens the connection between seeing a CC logo and adjusting the amount of tip. It does not matter if the adjustment is to tip more or tip less. The connection between seeing a logo and thinking of your spending power remains.

Furthermore, (B) is still a much stronger choice than any other answer choice available. Our task is to pick the choice that most strongly supports the psychologists' interpretation of the studies. So this is sufficient for us to wrap up the question and move on.
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Re: Studies in restaurants show that the tips left by customers who pay th &nbs [#permalink] 24 Oct 2018, 11:59

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