Legal Definitions - disincentive

A disincentive is something that discourages people from doing something. Laws often create disincentives through penalties, liability, and taxes. For example, the possibility of being sued for securities fraud is a disincentive for companies to lie to the public about their finances.

Disincentives can also be unintentional. For example, if a company offers a small bonus for employees who work overtime, it may unintentionally create a disincentive for employees to take breaks or work efficiently during regular hours.

Creating an incentive can also create a disincentive. For example, a law that protects whistleblowers who report illegal activity creates an incentive for people to report wrongdoing, but it also creates a disincentive for people to participate in illegal activity in the first place.