This chapter discusses the meaning of “incentives.” The term has become so ubiquitous that it has almost lost all boundaries and definition. It begins by attempting to distinguish incentives both from other forms of motivation and from other forms of trade or exchange, reward or compensation. It then sets out a distinctive meaning the concept of incentives. Incentives “strictly speaking” are a particular kind of offer: (1) an extrinsic benefit or a bonus that is neither the natural or automatic consequence of an action nor a deserved reward or compensation; (2) a discrete prompt expected to elicit a particular response; and (3) an offer intentionally designed to alter the status quo by motivating a person to choose differently than he or she would be likely to choose in its absence.