Are You Embedding Perverse Incentives in Your Outsourcing Agreement?

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Kate Vitasek

Incentives are usually considered a good thing, right? They encourage engagement, investment, and innovation. Then why has the topic of "perverse incentives" gotten so much traction? For one thing, the economist Steven D. Levitt (and Stephen J. Dubner) notably and entertainingly writes about "the strange and powerful nature of incentives" in two huge bestsellers, Freakonomics and SuperFreakonomics. So what exactly is a perverse incentive? It’s a type of unintended consequence. For...
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