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How do people respond to economic incentives - Term Paper Example

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In practical contexts, economic incentives not only inspire but also motivate an individual to act in a prescribed manner. Specifically,…
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How do people respond to economic incentives
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Download file to see previous pages Literally, positive incentives offer benefits to stakeholders within an economic environment. For example, discounts reduce prices of products while bonuses are monetary gains sued to incentivize people. Contrarily, negative incentives discourage behavior by presenting undesirable economic consequences when pursued. Examples of economic incentives include fines paid upon violation of predetermined economic regulations (Bowles 369). In practice, the use of economic incentives elicits particular reactions from people. Succeeding sections of this paper contain comprehensive evaluation of varied people’s reactions attributable to the use of economic incentives.
As aforementioned, positive incentives encourage the pursuit of one’s preferences. Economically, financial gain feature as the most important preference among people. Organizations use economic incentives to encourage frequent occurrence of desirable employees’ behavior. On the other hand, negative economic incentives are used to discourage certain behaviors within a workforce. For example, employees who meet or exceed predetermined levels of productivity are often rewarded with cash bonuses (Butler and Town 99). Contrarily, employees with low levels of productivity are often exempted from incentive programs, until their productivity levels increase desirably. In this context, cash bonuses provide positive economic gains to the over-productive employees, while exemption from incentive programs provides negative economic effects to under-productive employees. Conventionally, financial achievements feature as a relatively uniform interest for most stakeholders within an economic environment (Bowles 371). In this case, economic objectives are often accomplished easily when positive economic incentives are used as rewards for accomplishing the objectives. Therefore, economic incentives invariably encourage desirable behaviors high employees’ productiveness.
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