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Incentives, Perverse

Perverse incentive is an interesting concept with an intriguing name. Few things are labeled as perverse, so this term has some cachet as an unknown entity. In this entry, perverse incentives will be defined, explained, and contextualized in several industries. It should be noted that perverse incentives rarely succeed.

What Is a Perverse Incentive?

The Law Dictionary defines a perverse incentive as something that “incites or determines” someone to act in some manner in order to receive a reward, which proves in some way to be harmful and counterproductive. A different interpretation is that a perverse incentive is one that causes unintended and undesirable consequences for the source of the incentive and the recipient.

In the environmental context, perverse incentives are considered harmful to biodiversity, frequently as an ...

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