Tuesday, July 14, 2009

Incentive

In economics and sociology, an incentive is any factor financial or non-financial that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives. It is an expectation that encourages people to behave in a certain way. 

Since human beings are purposeful creatures, the study of incentive structures is central to the study of all economic activity both in terms of individual decision-making and in terms of more fair as bonuses are based on performance co-operation and competition within a larger institutional structure. 

 Economic analysis, then, of the differences between societies and between different organizations within a society largely amounts to characterizing the differences in incentive structures faced by individuals involved in these collective efforts. Eventually, incentives' aim is providing value for money and contributing to organizational success.

These categories do not, by any means, exhaust every possible form of incentive that an individual person may have. It's also worth noting that these categories are not necessarily exclusive; one and the same situation may, in its different aspects, carry incentives that come under any or all of these categories.

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