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incentive

in-SEN-tiv /ɪnˈsen.tɪv/

nounadjectiveB2SATACTGREGMATTOEFLIELTS

generalbusinesseconomics

Something that motivates or encourages an individual to perform a specific action.

Can be financial, social, or moral, designed to align individual actions with desired organizational or social goals.

The story behind the word. Derived from Latin 'incantare' (to chant or sing), 'incentivus' originally described music that set the tempo or excited soldiers into battle. In the 20th century, corporate management and economists adopted the word to describe reward structures that get employees and consumers moving in sync with corporate goals.

Word relationships

inducement: Inducement often carries a connotation of persuasion or bribery, whereas incentive is a structured motivator.
stimulus: Stimulus triggers a reaction or activity; incentive guides deliberate goal-directed action.

disincentive: A disincentive discourages or deters specific behavior by adding cost or risk.
deterrent: A deterrent prevents action through fear of negative consequences.

Commonly confused with

nudge: An incentive changes costs or financial rewards; a nudge changes how choices are formatted without altering costs.

Word family

incentivize (verb): To provide motives or monetary rewards for targeted actions.
disincentive (noun): A factor that deters a specific action.

Collocations

financial incentive
perverse incentive
incentive structure
economic incentive

Idioms & expressions

carrot and stick

Example sentences

"Tax relief on research expenditure provides a strong financial incentive for technology firms to innovate." Economics essay
"Perverse incentives often produce unintended consequences that exacerbate the original economic problem." Public policy speech

Memory hook

IN-CENT-ive puts CENTs in your pocket to make you act. Incentive = The spark that drives action.

When not to use

Do not use to describe passive choice architecture that does not change costs or benefits (use 'nudge' instead).

Fun facts

The 'Cobra Effect' is a classic perverse incentive: when the British government offered cash for dead cobras in Delhi, citizens started breeding cobras to collect money!