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Performance-based regulation (PBR) is an approach to utility regulation designed to strengthen utility performance incentives. Thus defined, the term PBR is synonymous with incentive regulation. Thus defined, the term PBR is synonymous with incentive regulation.
A common monetary incentive system used by firms is performance-based pay where incentives are paid based on employees' productivity or output over a particular period of time. Some methods are commission-based where the employee, for example a salesperson, receives a payment directly correlated to their output level.
A performance-linked incentive (PLI) is a form of incentive from one entity to another, such as from the government to industries or from an employer to an employee, which is directly related to the performance or output of the recipient and which may be specified in a government scheme or a contract.
Examples include quantity discounting, bulk pricing and two-for-one offers. [43] Third-degree price discrimination prices products or services differently based on the unique demographic of different groups. Examples of third-degree price discrimination are student or senior discounts, or discounted travel tickets for last-minute buys. [44]
Motivation crowding theory is the theory from psychology and microeconomics suggesting that providing extrinsic incentives for certain kinds of behavior—such as promising monetary rewards for accomplishing some task—can sometimes undermine intrinsic motivation for performing that behavior.
Absolute performance-related reward is an incentive mechanism widely recognized in economics in the real society, because it provides employees with the basic option of necessary and effective incentives. But, absolute performance-related rewards have two drawbacks. There will be people who cheat; Vulnerable to recessions or sudden growth
The need to encourage risk-taking behavior in seeking new investment opportunities while keeping costs under control requires deregulated companies to offer performance-based incentives to their executives. It has been found that increased compensation is also more likely to attract executives experienced in working in competitive environments. [9]
An economic development incentive is known as "cash or near-cash assistance provided on a discretionary basis to attract or retain business operations." [ 1 ] These benefits principally encompass tax and economic incentives provided by federal , state , or local governmental bodies.