Incentives
The Basic Idea
If you’ve ever had a salesperson pressure you into buying something, you know all about incentives. Often, salespeople make additional money based on how much they can sell – an incentivization tactic known as “working on commission.” Put simply, an incentive is something that motivates people – in the cases of sales, to sell as much as possible.
Incentives can be remunerative, like a commission, such that they motivate people to do something in order to get some sort of reward. They can also be moral, like doing volunteer work, which brings along a boost in self-esteem and possible praise from others. Coercive incentives occur when we are motivated to do something because the consequences of not doing it could be severe, such as respecting authority for fear of being fired or getting in trouble.1
Incentives and motivation are fundamentally intertwined, such that the incentive theory of motivation suggests that incentives give rise to motivation.2 This theory also suggests that different people are motivated by different incentives. An incentive will only boost motivation if what is being offered as an incentive is of value to the individual.3
Economics, when you strip away the guff and mathematical sophistry, is largely about incentives.
– John Cassidy in How Markets Fail: The Logic of Economic Calamities
About the Authors
Dan Pilat
Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.
Dr. Sekoul Krastev
Dr. Sekoul Krastev is a decision scientist and Co-Founder of The Decision Lab, one of the world's leading behavioral science consultancies. His team works with large organizations—Fortune 500 companies, governments, foundations and supernationals—to apply behavioral science and decision theory for social good. He holds a PhD in neuroscience from McGill University and is currently a visiting scholar at NYU. His work has been featured in academic journals as well as in The New York Times, Forbes, and Bloomberg. He is also the author of Intention (Wiley, 2024), a bestselling book on the science of human agency. Before founding The Decision Lab, he worked at the Boston Consulting Group and Google.
