Mixed Signals: How Incentives Really Work

Behavioral economist Uri Gneezy examines how incentives function as signals that shape behavior, and explores why conflicts often arise between stated goals and actual incentive structures. He illustrates this phenomenon—which he calls "mixed signals"—through real-world examples: a CEO promoting teamwork while rewarding individual performance, encouraging innovation while penalizing failure, or emphasizing quality while compensating for quantity. Drawing on behavioral economics, game theory, psychology, and fieldwork, Gneezy explains why incentives frequently fail to produce desired outcomes. He demonstrates how properly designed incentives can align signals with goals to achieve better results. The book shows how the right combination of economic and psychological incentives can influence specific behaviors, such as encouraging fuel-efficient driving, fostering workplace innovation, or increasing gym attendance. Gneezy provides guidance on designing simple and effective rewards, emphasizing that successful incentive design requires ensuring the signal sent by an incentive matches the intended objective.