Incentive-Caused Bias
Behavioral PsychologyDecision MakingEconomics
Incentive-Caused Bias occurs when individuals are influenced by their incentives, leading to biased decisions or actions.
Introduction
Incentive-Caused Bias occurs when individuals are influenced by their incentives, leading to biased decisions or actions.
Core Principles
- Alignment of Interests: Incentives shape behavior and motivations.
- Unintended Consequences: Misaligned incentives can produce undesirable outcomes.
- Critical Awareness: Recognizing biases to mitigate their effects.
Applications
- Corporate governance for designing fair compensation structures.
- Policy-making to avoid perverse incentives.
Related Resources
- Book: "Poor Charlie’s Almanack" by Charlie Munger.
- Tools: Behavioral analytics software.