Incentives can come in many forms.
Categorizing incentives[ edit ] Incentives can be classified according to the different ways in which they motivate agents to take a particular course of action. One common and useful taxonomy divides incentives into four broad classes: A person acting on a moral incentive can expect a sense of self-esteem, and approval or even admiration from his community; a person acting against a moral incentive can expect a sense of guilt, and condemnation or even ostracism from the community.
In this usage, the category of "coercive incentives" is excluded. For the purposes of this article, however, "incentive" is used in the broader sense defined above. Other forms[ edit ] The categories mentioned above do not exhaust every possible form of incentive that an individual person may have.
In particular, they do not encompass the many other forms of incentive — which may be roughly grouped together under the heading of personal incentives — which motivate an individual person through their tastes, desires, sense of duty, pride, personal drives to artistic creation or to achieve remarkable feats, and so on.
The reason for setting these sorts of incentives to one side is not that they are less important to understanding human action — after all, social incentive structures can only exist in virtue of the effect that social arrangements have on the motives and actions of individual people.
Rather, personal incentives are set apart from these other forms of incentive because the distinction above was made for the purpose of understanding and contrasting the social incentive structures established by different forms of social interaction.
Personal incentives are essential to understanding why a specific person acts the way they do, but social analysis has to take into account the situation faced by any individual in a given position within a given society — which means mainly examining the practices, rules, and norms established at a social, rather than a personal, level.
Social pressure[ edit ] One and the same situation may, in its different aspects, carry incentives that come under multiple categories. In modern American society, for example, economic prosperity and social esteem are often closely intertwined; and when the people in a culture tend to admire those who are economically successful, or to view those who are not with a certain amount of contempt see also: The classic example for a situation for asymmetric information can be that of a manager and worker, where manager may want a certain level of output from the worker.
The manager does not know the capabilities of the worker, and to achieve the best outcome, an optimal scheme of incentive may be chosen to motivate the worker to give their best performance.
A weak incentive is any incentive below this level. Performance-based regulation Incentive-based regulation can be defined as the conscious use of rewards and penalties to encourage good performance in the utility sector.
Incentives can be used in several contexts. For example, policymakers in the United States used a quid pro quo incentive when some of the U. Incentive regulation is often used to regulate the overall price level of utilities. There are four primary approaches to regulating the overall price level: With benchmarking, for example, the operator's performance is compared to other operators' performance and penalties or awards are assessed based on the operator's relative performance.
For instance, the regulator might identify a number of comparable operators and compare their cost efficiency. The most efficient operators would be rewarded with extra profits and the least efficient operators would be penalized.Employee incentives describe a system of rewarding success and effort in the workplace by allowing employees to earn prizes or recognition.
What Qualifies as an Employee Incentive? Incentives take many different forms and vary wildly from company to company. Incentives can come in many forms. Before you formulate your motivational program, it would help to understand different types of incentive plans. Stock Options. The various types of incentives are classified into two broad categories: financial and non- financial.
Here, we are concerned with financial incentives only.
Financial incentives may further be classified as individual incentives and group incentives. Points Systems are incentive programs where employees can earn points for a variety of positive behaviors. The employees save up the points to purchase the prize of their choice. The benefit of a points system is it allows you to reward your employees for a huge variety of behaviors and goals.
A company that provides various types of incentives, tailored to individual workers, motivate employees to consistently do their best. Profit Or Gain-Sharing Giving employees the chance to share in productivity gains or profits, usually through cash or stock bonuses, can motivate them to hit individual benchmarks or help reach team-wide or organizational objectives.
External incentives can include such things as peer recognition, fame, social status and power.
Some of these incentives will work better than others, depending upon your preferences. Someone may care more about social status, for example, than money.