Examples Of Incentives

Michael Cortese
Economics Essay The world is full of companies that try to gain edges on other companies to have more of an economical advantage. Some of these "edges" companies have incentives. An incentive in dictionary form is a thing that motivates or encourages one to do something, in a larger perspective incentives aren't just used by companies, maybe by parents to give their kids cookies if they complete their schoolwork or to make people not break laws by giving people tickets. A better way of describing incentives is say you are trying to the store and all you have is a wagon attached to donkey and someway you have to motivate the donkey to pull you to the store. Some people would whip the donkey from the back to get the donkey walking and other people would attach a carrot to a stick in front of the donkey so the donkey would try and eat it and would start moving. Companies in the modern world grasped this concept and once they did it made a cornerstone of economic life.

In a 1000-year-old tradition that focuses on honor such as sumo wrestling, cheating would seem to be non existent. Formerly in the sumo world, two men separately came forward with accounts of cheating. Rankings gives incentives to the sumo wrestlers to rig matches. Using data on every match in a tournament find that wrestlers who are one win away from moving up in the rankings are more likely to win than usual. Each year numerous tournaments occur to decide the rankings. All tournaments have the same structure: 15 bouts in 15 days for each wrestler, an 8-7 record warrants a ranking increase of one place and a 7-8 record decreases a wrestler’s ranking by one spot. With the eighth win worth the most, a wrester going into the final with 7-7 has more to lose than one with 8-6. This non-linear payoff structure generates a situation where conspiracy for two wrestlers is attractive. The incentive is if that one wrestler with 7-7 wins because the 8-6 wrestler lets him win, later on in the tournament if it comes down to first place and second and both wrestlers are in it, the 7-7 wrestler would let the other man win.

In the last decade, the states and the federal government have begun using student scores on assessment tests to evaluate public school performance. Teachers in schools with large increases in test scores may be eligible for a pay increases of as much as $25,000. In other states, years of bad test results have resulted in entire school staffs being required to reapply for their

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