Incentive

economic-dictionary

An incentive is a mechanism that relates a reward or punishment to a certain performance or behavior.

The objective of establishing an incentive is to induce a certain behavior. It is assumed that the subject to whom it is applied will act as a rational agent evaluating costs and benefits (homo economicus).

Therefore, the objective subject will consider optimal to develop the behavior that the designer of the incentive seeks, provided that said stimulus is well designed.

Thus, for example, if you want to motivate a worker to try harder, you can design an incentive that rewards their best effort. If it is a salesperson, a common incentive is to share in the highest sales through commissions.

Types of incentives

There are at least four types of incentives:

  • Monetary or financial incentives: They are the most widely used and surely one of the most effective. They can include a higher salary, payment of sales commissions, prices in money or stocks, etc.
  • Moral incentives: They try to push people to do what is supposed to be right or good in a given society. Moral incentives are more complex to apply than monetary ones since values ​​vary between different cultures. In addition, it is the person who finally decides whether or not he agrees with a certain moral convention.
  • Natural incentives: They are based on human nature itself. Thus, for example, people in general are naturally curious so they can be motivated to do certain things in order to satisfy these natural needs.
  • Coercive incentives: They are based on emphasizing the negative consequences or punishments that will not carry out a certain conduct or behavior. These are incentives that are based on the negative and therefore do not usually motivate subjects internally, and they only act out of fear.

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