How Incentives Work – Explained in Detail

The human mind is complicated; we don’t exactly know why we choose toothpaste in the grocery store or the cloth we are wearing today. We often make decisions to do our next work.

The thought process depends on the situation. Our mind pushes us to take the right decision after thinking about all the logical reasons. And we make a final decision after seeing the situation’s pros and cons.

We need a lot of research on how the human mind behaves. Once you understand what makes a person happy, you will know how Incentives Work. And when you give someone a logical reason to satisfy their emotion, you will make that person happy.

How do incentives and the economy work?

Most people make the right decision when it comes to the economy. A person solves economic problems more effectively than other problems. If we talk about economic incentives examples, then a human must think about all positive things before buying anything.

According to some economies, humans behave more like regional actors. Although some experts may deny this fact. But there is something like behavioral economics that exists.

What is the rational choice theory? 

All economists believe in rational choice theory. According to this theory, people only decide according to their economic situation. If we take economic incentives as examples, then every human considers each factor before buying something.

You will think you have to do some extra work for extra money. It all comes within the rational choice theory. Thoughts like how much you dislike your boss, how your days don’t come on this list.

We can understand rational choice theory like this. Suppose you want to buy a car. Now you will come with the most logical choice according to your situation. If you want a car for your family, you will not go for the sports car. That’s how it all works.

A person looks for every possible situation when making a decision. But you know people don’t only make their decisions purely logically. 

Talk about behavioral economic model.

In the 1950s, people started the rational way of thinking. Although it seems easy to us, it is somehow very tricky. According to economist Hebert Simon, people don’t have enough information. That’s why they always make rational decisions.

Some economists also suggest that when humans make a decision, they don’t think about it from beginning to end. If we talk about it, it is very easy to understand, like sometimes you can’t decide how to spend your day and what to eat for lunch. When you spend more time thinking you will end up with no decision.


Here we talk about many factors about how the human mind works. A human mind decides after seeing all the consequences. Here we talk about all the necessary factors that keep us thinking, but the main factor that plays a vital role is the economy. To know more, you can check out the article.

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