An incentive is a reason or motivation that encourages parties to engage in certain conduct or to take certain actions. In the legal context, incentives are often created through laws, regulations, financial subsidies, or tax provisions. They are used as a tool to encourage desired behaviors and to achieve public policy goals.
For example, a government may provide tax credits or subsidies to businesses that invest in renewable energy, in order to incentivize the use of cleaner and more sustainable energy sources. Similarly, a state may offer a financial incentive to doctors who agree to work in underserved areas, in order to address a shortage of healthcare providers.
[Last updated in March of 2023 by the Wex Definitions Team]