incentive

Examples of incentive in the following topics:

• Individuals Respond to Incentives

  • Perhaps the most notable incentive in economics is price.
  • Remunerative incentives: The incentive comes in the form of some sort of material reward – especially money – in exchange for acting in a particular way.
  • Societies and cultures are two main sources of moral incentives.
  • Coercive incentives: The incentive is a promise of some sort of punishment if the wrong decision is made.
  • Economics is mainly concerned with remunerative incentives, though, when discussing government regulations, coercive incentives often come into play.

• Tax

  • The tax is set equal to the value of the negative externality and provides incentives for allocation of resources closer to the social optimum.
  • Taxes make it more expensive for firms to produce the good or service generating the externality, thus providing an incentive to produce less of it .
  • The polluter now has an incentive to generate less pollution.
  • This gives producers an incentive to reduce output to the socially optimum level.

• Introduction to Optimization and Markets

  • One of the basic precepts of Neoclassical microeconomics is that voluntary markets for goods with nonattenuated property rights will provide the information and incentives that coordinate individual behavior to achieve the maximum utility for society.

• Profits in Long Run Pure Competition

  • These firms have no incentive to advertise.
  • Firm earn normal profits at this point and there is no incentive to enter or leave the market.
  • There is no incentive to alter plant size or change the output level.
  • There is no incentive for firms to enter or leave the market.
  • MR =LRMC; the firm has no incentive to alter output or plant size.

• Issues In Property Rights

  • Private property rights have long been seen as an important incentive for good stewardship.
  • These property rights also insure that individuals with have a strong incentive to create new ideas and inventions.
  • Lawrence Lessig argues that property rights must be balanced between provision of incentives and to allow others to use intellectual property to extend knowledge.
  • How can property rights be structured to provide incentives for creators to continue to develop new ideas?

• Social Impacts of Monopoly

  • A monopoly can diminish consumer choice, reduce incentives to innovate, and control supply to enforce inequitable prices in a society.
  • Reduced Efficiency: A less direct societal risk of monopolies is the fact that competition is closely linked to incentives.
  • A competitive market will see constant strives to reduce costs in order to capture higher market share and provide goods at lower prices, while monopolies do not have this incentive.

• Economic Decisions

  • Within any economic system, agents must have information and there must be a set of incentives to encourage appropriate actions.
  • Individuals have incentives to behave in ways that will lead to the satisfaction of their preferences.
  • This guilt is and incentive to perform a duty.
  • Since neoclassical economics is based on a consequentialist ethic that is expressed through markets, the incentive provided by the satisfaction of self-interest is perceived as dominant.
  • Other incentives may be equally as important.

• Institutions and Costs

  • The communication industries have a greater incentive to influence the policies of the Federal Communications Commission (FCC) than the average person.
  • The vested interests have an incentive to shape the formal and informal institutions that relate to their activities.

• Principle-Agent Problem

  • The linear model is used to determine incentive compensation in a contract: w = a + b(e + x + gy).
  • Principals offer various incentive structures, which are rewards or motivating factors that drive the agent to work in the best interest of the principal and complete tasks efficiently.

• Quotas

  • The market for tradable permits creates incentives for firms to produce less pollution.
  • Emissions trading or "cap and trade" is a market-based approach used to control pollution by providing economic incentives for reducing the emissions of pollutants.