Can a Change in Incentives be Counterproductive?

Change in Incentive = A change in behavioural outcomes

In this presentation I will..

Explain what an economic incentive is and the way in which it effects us

List the ways in which they can be counterproductive

Provide Case Studies Conclude on why economic incentives may not

always be the best approach to increase productivity

An Incentive from a Economic Perspective

“An incentive is something that induces a person to act, such as the prospect of a punishment or reward. Because rational people make decisions by comparing costs and benefits, they respond to incentives” - Principles of Economics, Volume 1

People respond to incentives

Main aspects which can cause a change in incentives to be counterproductive

An incentive can only be effective for so long When the incentive is removed or changed,

behavioural outcomes will also change Incentive dependency Incentives based on market norms instead of

social norms

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http://www.youtube.com/watch?v=W2hhIWbz0Ns

Conclusion

Although incentive can and do work this is mostly only in the short-term and will become ineffective in the long time, especially when changed.