A-Z Popular Blog Top Search »
Related Guides

What are Perverse Incentives?

 , updated on November 21, 2016
A perverse incentive is a negative unintended consequence of a performance goal, evaluation criteria, incentive program, regulation or system.
Overview: Perverse Incentives
Goal Setting
DefinitionA system or practice that rewards negative outcomes.
ExamplesA corporate officer who will be heavily rewarded if a firm achieves high profits and will receive a large payment if they are fired has incentives to take excessive risks. If the risks pay off, they will be generously compensated. If the risks cause financial losses, they will be fired and generously compensated.
Doctors who are paid to treat diseases but aren't compensated for prevention steps.
Subsidies that cause overproduction of a particular crop.
Related ConceptsMoral Hazard
Conflict Of Interest


This is the complete list of articles we have written about risks.
AI Risk
Risk Avoidance
Brand Risk
Budget Risk
Business Risks
Change Risk
Compliance Risk
Concentration Risk
Cost Risk
Country Risk
Credit Risk
Demand Risk
Dread Risk
Economic Risk
Exchange Rates
Existential Risk
External Risk
Financial Risk
Force Majeure
Good Risk
Human Error
Risk Identification
Infinite Risk
Inflation Risk
Inherent Risk
Interest Rates
Internal Risks
Investing Risk
Legal Risk
Liquidity Risk
Model Risk
Natural Disasters
Negative Risk
Operations Risk
Passive Risk
Personal Risk
Political Risk
Process Risk
Procurement Risk
Product Risk
Project Risk
Pure Risk
Quality Risk
Risk Mitigation
Refinancing Risk
Regulatory Risk
Reputational Risk
Residual Risk
Resource Risk
Revenue Risk
Risk Appetite
Risk Aversion
Risk Examples
Risk Management
Risk Management Process
Risk Matrix
Risk Meaning
Risk Measurement
Risk Taking
Risk Tolerance
Risk Triggers
Risk vs Issue
Risk vs Opportunity
Risk vs Uncertainty
Risk-Reward Ratio
Seasonal Risk
Secondary Risk
Security Risk
Settlement Risk
Risk Sharing
Speculative Risk
Strategic Risk
Strategy Risk
Supply Risk
Systemic Risk
Tactical Risk
Taxation Risk
Technology Risk
Risk Transfer
Unforced Error
Upside Risk
If you enjoyed this page, please consider bookmarking Simplicable.

Conflict Of Interest

A few examples of conflict of interest.

Chinese Wall

An overview of Chinese walls as a compliance tool.


The definition of duty with examples.

Crony Capitalism

The definition of crony capitalism with examples.


An overview of cronyism with an illustrative example.

Dual Agency

The definition of dual agency with examples.

Professional Ethics

The definition of professional ethics with examples.

Business Risks

A list of common business risks.

Risk Treatment

The four things that can be done about risk.

Risk Management Effectiveness

A metric for measuring risk management.

Positive Risk

The potential that you'll achieve too much of a good thing.

Dread Risk

Any risk that people have a strong aversion too.

Risk Taking

The definition of risk taking with examples.

Risk Examples

A list of risk examples by type.

Risk Probability vs Risk Impact

The two main factors in modeling a risk.

Calculated Risk

A definition of calculated risk with an example.

Relative Risk

How to calculate relative risk with examples.
The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map