• If you are citizen of an European Union member nation, you may not use this service unless you are at least 16 years old.

  • Finally, you can manage your Google Docs, uploads, and email attachments (plus Dropbox and Slack files) in one convenient place. Claim a free account, and in less than 2 minutes, Dokkio (from the makers of PBworks) can automatically organize your content for you.


Positive and Negative Economic Incentives

Page history last edited by Robert W. Maloy 11 months, 2 weeks ago


Focus Question:  How people respond to positive and negative economic incentives?


1905 Quaker Oats magazine advertisement


1905 Quaker Oats magazine advertisement

Topics on the Page

Positive Incentives

Negative Incentives


Calvin Klein knit sneaker, 2018

Click here for a definition of Economic Incentives

Positive Incentives: financial rewards for making specific choices or taking certain actions. For example, buying certain items at the store, eating at certain restaurants, or choosing certain companies.

Negative Incentives: financial punishment for making specific choices or taking certain actions. For example, speeding or littering.

Businesses and government agencies offer incentives.


  • Businesses like restaurants or stores offer positive incentives like discounts or coupons in order to get people to choose their business. 
    • In the long run,it is hoped that this will bring in a customer to the business so it can make more money. 
      • People often respond to positive incentives by choosing the companies that offer them the best reward. 




  • People also respond to negative incentives
    • The government offers negative incentives in the hope that it will keep people from breaking the law. 
      • For example, there is a fine for speeding and for not wearing your seat belt. There is also a fine for littering. This negative incentive keeps people from committing these acts because they do not want to pay the penalty.


  • "Why Markets Work" from learner.org detailing the key concepts of the market, including incentives.


  • Video about how motivation may be in fact driven by purpose and not monetary incentives. Discusses how positive and negative incentives represent rewards or punishment.



  • Click here for a video detailing economic incentives


  • Click here for a YouTube video discussing the power of economic incentives


Harvard Business Review article that deals with instances in which incentives backfire

There is a recent movement in the US to move away from negative incentives in the Justice System. The argument is that negative incentives, such as littering laws and fees for broken tail lights reinforce systems of poverty because they disproportionately affect low income people. 


For an article about scaled fees as a way to continue implementing negative economic incentives, look at




For an excellent overview of the way that fees and fines create a series of cascading negative economic incentives and their impact on poor communities, especially those of color, check out How Fines and Fees Criminalize Poverty: Explained, by The Appeal.



Click here for an article discussing how governments use economic incentives to increase inequality


For an article by the Human Rights Watch, an international organization that focuses on human rights abuses around the globe, check out: US Justice System Fuels Poverty Cycle.


For an article about changing US policy from negative incentives to positive incentives, check out: The Other Side Of Broken Windows by The New Yorker.


For an article about alternative methods to negative incentives with regard to littering, check out: Littering and Following the Crowd, by The Atlantic.

The source mentioned at the bottom, econedlink.org, is an excellent resource with clear examples and explanations. It has a useful worksheet about economic incentives, and other ideas for a constructive classroom lesson as well.


  • Here is a page from econedlink.org with a discussion of incentives, both positive and negative, in the style of a lesson for the earlier grades. It could be modified slightly to work with older grades as well. 


    • Here is another page from the same site which walks students through identifying which is a positive incentive vs. a negative incentive. The examples could be slightly modified depending on grade level.

Economic Incentives in Our Community is another lesson plan to help illustrate the concept.


Click here for a study detailing the differences in how men and women respond to incentives

Lesson plan outline from econedlink.org that allows students to think about examples when their decisions were swayed based off of an incentive.


Click here for a lesson plan on economic incentives


Click here for a lesson plan on Incentive Theory


Gamification is the application of game playing to product marketing and sales and to education and classroom learning.

Keeping Up with Gamification, Association of College & Research Libraries

What is Gamification? YouTube


Government agencies use which of the following to prevent people from breaking laws.


A. Positive incentives

B. Negative Incentives

C. Economic Rewards

D. Economic Returns

Answer: B


Economic Incentives in our Community. Accessed May 5, 2008. http://www.econedlink.org/lessons/index.cfm?lesson=EM390

Comments (0)

You don't have permission to comment on this page.