How People Respond to Incentives



How People Respond to Incentives

Introduction

When one talks about incentives, and how some of people are responding to them, it can be seen that incentive is defined as something that has this ability to make a person act. Most of the people whenever they are taking any action have this tendency of weighing the pros and cons of their actions. It can also be implied as the way an individual weighs the marginal cost and marginal benefits of each action that is being taken by him. This can be illustrated with the example of Automobile, as when there is a price hike in the automobile sector, there will be more incentive for the automobile manufacturers to make sure that they hire more labor and produce more quantity of the automobile (David et al., 2002). There will be the discussion about the subject that will be related to an Apartment Community and Management, and there will be discussion about how some of people are bound to react to the incentives.

Discussion

Economic Rational

Economics is a field of science that depend on certain models and after that these theoretical models are related to the everyday life. There is this underlying and basic assumption in the economics that talks about how an individual acts in a rational manner and always tried to maximize his or her own utility. The most essential principal in economics is that of incentives. A well-known Harvard economist, Gregory Mankiw, presented a thought that individuals react to motivations, and they will always look at their own interest when making a decision. Another instance is stated by the Armchair Economist, Steven Landsburg that “the majority part of the economics studies could be summarized in four words, i.e. “people react to incentives” (Penner & Eugene, 2004).

People Responding to Incentives

“People respond to incentives”, factuality of this statement will found out by applying this principle in Apartment community and management systems. People respond to various distinctive sorts of incentives, and through those incentives, they are motivated and persuaded by a sense of community and duty in how they make decisions about their lives and how they respond to the challenges that are being faced by them. Thus, the reality is that a great number of population and corporations are primarily driven by economic incentives (Finkelstein et al., 2008). Even though, the incentives are highly significant for Policy making by the government, the point that policymakers do not really look after and fail to recognize is that how their approaches are influenced by the incentives. They can for instance, consider the public policies in regards to society or community wellbeing must require some things to be incorporated with policies that could encourage people to act upon those policies.

People's Behavior

People are prone to change the way they behave as per the incentives that are being offered to them. But there is a significant indication that shows that there are some instances when people will even go beyond their conventional wisdom ...