Perverse incentives Essays - Motivation, Disincentive,

Perverse Incentives 1)A: A company pays the workers for how many cars they can produce. Instead the workers made little toy cars to produce more to get paid a large sum of money. B: Any system of performance-related pay for corporate executives can induce unacceptable risk-taking, unless there are penalties for poor performance C: Government rebates for low gas consumption vehicles encourage people to buy those vehicles. People who own low gas consumption vehicles find that the cost of driving their cars has gone down, since the cars require less gas, and hence they will want to drive their cars more often. This could result in an increase in total gas consumption. D: No Child Left Behind Act-type laws require schools to show smooth improvement in their students' test scores. Thus, schools may benefit from having poorer performance one year in order to show 'improvement' the next. Alternatively, where tests are given near the end of high school, schools may benefit from not making efforts to discourage lower-achieving students from dropping out before these students are old enough to take the tests. 2) Disincentive: something that discourages or deters; deterrent: High interest rates and government regulations are disincentives to investment. A: The stock market crash B: Occupational Injury Pay Supplements: Many firms pay supplemental benefits to make up the difference between workers compensation benefits and regular earnings. C: Short-Term Disability: In some companies, disabled employees receive STD benefits in lieu of salary after six weeks. But the standard definition for disability may differ from workers comp, allowing an employee to collect both 3) Perverse incentive: is when you tell your company or workers if you do something or produce something you will get paid a larger amount. A Disincentive is when you have something that discourages someone from doing something because it is not what that person thinks is right.