This article describes issues that should be considered in the development of a theory or theories about incentives from which testable hypotheses could be derived. Economic, psychological, and organizational theories are described, and issues that should be considered in hypothesis generation are presented. Psychological factors influencing incentives include decision framing, regret, heuristics, and reinforcements. Organizational factors influencing incentives include bundling of services or people, matching of incentive structure with work organization, and the incompletely contained hierarchical nesting of incentives. Finally, the dynamics of incentive change are considered, with a focus on describing the conditions under which physicians and physician organizations respond to incentive changes.
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