In psychology, an incentive is any stimulus or reward that drives action, often by making some behaviors preferable. Incentives may be physical, like points or money, as well as abstract or symbolic, like praise, recognition, or satisfaction.
Consider, for instance, the example of a student who studies hard for the incentive of receiving good grades or getting approval from parents. Incentive theories of motivation posit that behavior is directed not only by internal drives but also by external rewards and consequences. Positive incentives increase the chance of behavior being repeated, while negative incentives, like punishments, reduce that chance. Incentives are well studied in relation to learning and the formation of habits.
For example, studies in the workplace demonstrate that recognition and rewards function as motivators for increased productivity from employees. Psychologists, however, caution against the over justification effect and the risk of excessive external rewards demotivating engagement. This suggests that the provision of incentives, in some sense, hinges on the balance between external rewards and the freedom to choose and grow.