Perverse incentive

Incentives, motivation

An incentive is perverse if it leads to unintended and undesirable results. The solution (incentive) makes the problem worse.

The Cobra Effect is the most famous example. From Wikipedia:

"The British government, concerned about the number of venomous cobras in Delhi, offered a bounty for every dead cobra. Initially, this was a successful strategy; large numbers of snakes were killed for the reward. Eventually, however, enterprising people began to breed cobras for the income. When the government became aware of this, the reward program was scrapped. When cobra breeders set their now-worthless snakes free, the wild cobra population further increased."

People will seek to satisfy the measurable target to get the incentive, irrelevant of the method. Thus, designing an incentive poorly can lead to the opposite effect than was intended. There are various examples in sales representative's bonuses, journalism, alcohol/drug prohibition, all kinds of buyback programs...

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