Incentive

An incentive is a benefit or cost that changes the attractiveness of an action and thereby influences choices or behavior.

Opportunity cost: The value of the best alternative forgone when a choice is made. An incentive changes a choice partly by changing what must be given up.
Performance-related pay: Compensation linked to measured output, results, or performance. It makes earnings depend directly on the work outcomes an employer wants to encourage.
Intrinsic motivation: Engagement in an activity because it is inherently interesting or satisfying. It contrasts with acting primarily for an external benefit or to avoid a cost.
Goodhart's law: The principle that a measure can stop being a good measure when it becomes a target for optimization. Tying rewards to a metric can prompt behavior that raises the score while undermining the goal.
Preference: A comparative ranking of possible outcomes or options by an individual or group. An incentive influences action by changing the consequences considered within existing preferences.
Expected utility: A decision model that evaluates uncertain outcomes by weighting their utilities by their probabilities. People often respond to an incentive according to its expected value, not its guaranteed outcome.
Tax incentive: A tax reduction or tax treatment designed to encourage a particular activity or investment. Governments use tax costs and savings to influence private decisions.
Extrinsic motivation: Engagement in an activity to obtain an external outcome or avoid an external consequence. It describes the motivational route most directly shaped by explicit incentives.
Moral hazard: A tendency to take greater risks when another party bears some of the resulting costs. Protection from consequences can weaken the cost that would otherwise discourage risky choices.
Utility: A representation of how desirable an outcome is to a decision-maker. Incentives matter insofar as their benefits or costs change the utility of available actions.

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