Incentivisation or incentivization is the practice of building incentives into an arrangement or system in order to motivate the actors within it. It is based on the idea that individuals within such systems can perform better not only when they are coerced but also when they are given rewards.
Concept Incentivization aims to motivate rather than encourage enthusiasm so that individuals perform better. It is distinguished from a bribery system in the sense that it provides the "spark to motivate, stimulate, move, and encourage workers to strive for a personal best." As a result of this motivation, it is proposed that incentivization can improve the efficiency of different systems. Incentivization follows certain notions proposed by psychological theories such as Self-Determination Theory, which highlights both extrinsic and intrinsic motivation. Incentivization highlights human behavior in response to factors which impact our extrinsic motivation. Extrinsic motivation refers to individuals changing their behavior in order to meet an external goal, or receive praise, approval or monetary rewards. Incentives act as extrinsic motivators, providing external ‘purpose’ to an individual, which has been key to developing a person's psychological health and wellbeing. This is different to intrinsic motivators, which are based on self-interest and are exempt from external pressure. For example, Wikipedia editors have an intrinsic incentive to contribute to the website as there is no financial reward but instead altruism, recognition, and reciprocity. There are different types of incentives that should be accounted for incentivization strategies. Economic incentives account for the material gains or losses, whereas social incentives account for reputational gains or losses. Psychological/Behavioral incentives refer to “external stimuli, such as a condition or object, that enhance or serve as a motive for behavior.” These are influenced in accordance with Bandura's Social Cognitive Theory. Bandura's theory suggests that we are likely to produce behavior when we are motivated to do so. Incentives are developed through social learning, for example, ‘vicarious reinforcements’, which refers to when an individual observes a ‘role model’ receiving positive reactions to their behavior and ‘reinforce’ why they must replicate this behavior. Vicarious reinforcement involves people developing incentives through empathizing and feeling people's behavior. For example, a student may observe a teacher praising a classmate for exceptional creativity and will be incentivized by that praise to recreate/imitate that behavior. However, while Bandura's theory allows us to draw links between social learning and incentivization, it does not consider ‘human agency’, which suggests that people are consciously able to affect their willingness to engage in behavior. Therefore, biological and cultural explanations are further needed to substantiate this notion. It is important to understand which type of incentive motivates the target group of an incentivization strategy. For instance, exposure to extrinsic monetary incentives may counteract other incentives/motivations and lead to less overall interest in the task. In cases like this, incentivization backfires. An incentivization strategy can leverage an existing system of measures to address interrelated issues such as those involving risk, cost, and performance if done correctly.7 This can be adopted in multiple fields.
Biological psychology of incentivization An individual's response to incentivization appears to be controlled by the ventromedial prefrontal cortex. The brain can express a decreased response to incentivization after experiencing damage to or near the nucleus accumbens. However, people may become more sensitive to incentives when there is damage to the subgenual ventromedial prefrontal cortex. The biological approach to incentivization is linked to biological explanations regarding human extrinsic motivation, emotion and learning signals. Firstly, we can attribute the majority of learning signals to mechanisms occurring within the visceral body. Through an evolutionary lens, it is known that human beings developed brain mechanisms that alter the direct functions of the visceral body. An example of this is the Hypothalamus, which slows down metabolism in order to maintain ideal homeostatic levels. If this mechanism is weaker in certain individuals, they are more likely to feel a lack of motivation and less affected by incentives. Through maintaining body homeostasis, individuals are able to get through their day feeling less lethargic, bored and distracted. The hypothalamus is linked to the aforementioned nucleus accumbens. The ventromedial prefrontal cortex regulates the activity of the ‘Amygdala’ within the brain of an individual. The Amygdala is involved in both emotion activation and stimulus/re-enforcement learning. Therefore, people are more likely to consider incentives when their Amygdala is not functioning at an optimal level, as their ability to regulate emotions is limited. This is due to research suggesting that the Amygdala allows for” stimulus re-enforcement association information”, which suggests how likely we are to turn our extrinsic motivators into incentives. Essentially, a change in Amygdala activity impacts our likelihood of undergoing ’Vicarious Reinforcement.’
Behavioural economics of incentivization Behavioral economics highlights that humans have two cognitive systems. One is automatic and the other is reflective. The reflective system is seen as more rational and/or cognitive. It is more controlled, effortful, rule-following, self-aware and deductive. The reflective system allows us to analyse available information as well as the incentives offered to us to act in their best interests. This contrasts with the automatic system, that takes short-cuts, uses heuristics, and biases. The two systems are also commonly referred to as the 'Fast and Slow' systems of thinking, with the reflective being ‘slow’ and the automatic being ‘fast’. Incentives change behaviour by changing people's minds. Once the possible rewards are highlighted, the reflective system weighs up the revised costs and benefits of our actions and responds accordingly.
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