Definition 1

An incentive is something that motivates an individual to perform an action. It is therefore essential to the study of any economic activity. Incentives, whether they are intrinsic or extrinsic (traditional), can be effective in encouraging behavior change, such as ceasing to smoke, doing more exercise, complying with tax laws or increasing public good contributions. Traditional incentives can effectively encourage behavior change, as they can help to both create desirable and break undesirable habits. Providing upfront incentives can help the problem of present bias – people’s focus on immediate gratification. Finally, incentives can help people overcome barriers to behavior change (Gneezy et al., 2019).

Source: Behavioral Economics

Definition 2