science

Incentive-centered design

Incentive-centered design is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Incentive-centered design rather than just read about it. In short: Incentive-centered design (ICD) is the science of designing a system or institution according to the alignment of individual and user incentives with the goals of the system. Using incentive-centered design, system designers can observe systematic and predictable tendencies in users in response to motivators to provide or manage incentives to induce a greater amount and more valuable participation.

Key takeaways

Incentive-centered design belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Incentive-centered design to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Incentive-centered design from memory before moving on to harder problems.

Reference excerpt

Incentive-centered design (ICD) is the science of designing a system or institution according to the alignment of individual and user incentives with the goals of the system. Using incentive-centered design, system designers can observe systematic and predictable tendencies in users in response to motivators to provide or manage incentives to induce a greater amount and more valuable participation. ICD is often considered when designing a system to induce desirable behaviors from users, such as participation and cooperation. It draws from principles in various areas such as Economics, Psychology, Sociology, Design, and Engineering. ICD has been gaining attention in research communities due to the role it can play in helping systems benefit their users and ultimately achieve better results. This is also relevant to the incentive-based frameworks inside Human-Computer Interaction.

History In 1996, the Nobel Prize in Economics was awarded to William Vickrey and James Mirrlees for their work in "The economic theory of incentives under asymmetric information", which was a core issue addressed by the theory of mechanism design. The theory of mechanism design was an antecedent to incentive-centered design, and on October 15, 2007, Roger Myerson, Leonid Hurwicz and Eric Maskin received the Nobel Prize in Economics from the Royal Swedish Academy of Sciences for their contributions to that theory. Leonid Hurwicz was the founder of the theory of mechanism design, which is a branch in economics that deals with game theory. In mechanism design, designers try to satisfy design goals in specific sets of games by setting outcome functions and message space of the game. The idea of designing "mechanisms", or sets of institutional participation rules, in order to achieve the designer's goals for a system, is a core concept for ICD. In 2001, the STIET program (Socio-Technical Infrastructure for Electronic Transactions) received a grant to fund for doctoral fellowships and a multidisciplinary program for the University of Michigan. The program aimed to train, research, and outreach to modern information systems through an incentive-centered design approach. The participants in the program composed of doctoral students and also faculty members of the universities. In 2004, Paul Resnick, one of the four faculty members in the STIET research group of Michigan coined the phrase "Incentive-centered Design" to describe the type of work they did. In 2007, Wayne State University joined the University of Michigan to focus the program on Incentive-centered Design, and the STIET program received a five-year renewal grant that allowed for research in incentive-centered design. From 2010 to 2015, approximately fifty British academics engaged in the ORCHID project, with one of their chief aims being to elaborate the principles of ICD (referred to as "incentive engineering").

Interdisciplinary concepts

Incentive-centered design branches from various areas and can be applied to a multitude of systems and concepts. It is closely related to user-centered design in that it takes user's wants, needs, and limitations during the design process for a product. Additionally, ICD is connected to human–computer interaction since it involves the conjunction of humans and machines and how the two can mend together well. In particular, ICD blends together the goals of the user and the goals of the system so that the user can have a pleasant and valuable experience while using the system, and the system can give the user what they need and ultimately become more aware and responsive to varying needs. ICD also borrows from the Theory of Incentives. Conflicting objectives and decentralized information are two of the main components of the Theory of Incentives. ICD works to understand the objectives of the user and the system and combine and process information so that both parties obtain optimal results.

Information security Information security is the concept of protecting information and information systems from unauthorized access and use. Incentive-centered design can assist in bringing into consideration the errors that humans can make when using a system. These errors could potentially lead to weaknesses in the system that can be taken advantage of by attackers. With ICD, a system can guide a user into providing appropriate and adequate information to prevent system weaknesses. A simple example would be the generation of passwords. By providing users tips, motivation and feedback on the passwords that they choose, systems can ensure that user accounts have a significantly decreased chance of getting attacked.

User-generated content User-generated content in simple terms, refers to media content that are created by users that are made publicly available on the internet. Incentives for users to contribute to user-generated content would be receiving recognition for their work, connecting with others, and self-expression. Examples would include users uploading their own videos on the YouTube platform, posting reviews on a website, etc. User-generated content has three requirements. One is the publication requirement, and the second is the creative effort requirement - users must add their own original creative effort and value into their work. The final requirement is that the creation is outside of professional routines and practices - most user-generated content is non-professional and have no relation with anything institutional or commercial.

Reputation systems Everything has a reputation - goods, services, companies, service providers, etc., and by basing on the collection of opinions of other entities on those things, the reputation system uses an algorithm to generate reputation scores for those things. Reputation systems are similar to recommendation systems - purchasing decisions of goods and services are influenced by the reputation scores of those goods and services, and goods with high reputation scores will attract more buyers. Examples would include Amazon and eBay, where customers who purchase the item are able to rate and review the quality of the product. The cumulative ratings would be displayed for the product, indicating its quality and popularity. A relation to incentive-centered design would be that if sellers on eBay have a high reputation, then other users would be inclined to buy from them or if the item itself has high ratings, users will be more likely to go for that item.

… excerpt ends here. Continue reading the full article.

Illustrations

Worked examples

Example 1 — a first encounter with Incentive-centered design

Start with the simplest possible case. Write down what Incentive-centered design claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Incentive-centered design before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Incentive-centered design ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Incentive-centered design

In research: Incentive-centered design appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Incentive-centered design in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Incentive-centered design is common in secondary-school and first-year university syllabi. It links to neighbouring topics Behavioral economics, Incentives, Mechanism design, so understanding it makes those chapters shorter.
In everyday life: Look for Incentive-centered design outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Incentive-centered design in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Incentive-centered design means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Incentive-centered design out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Incentive-centered design in simple terms?

Why does Incentive-centered design matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Incentive-centered design?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Incentive-centered design.