Incentive Theory is a psychological concept that explains how external rewards motivate behavior. According to this theory, people are driven to act in certain ways to achieve desirable outcomes, such as money, praise, or recognition. For example, a student might study hard for a test to earn a good grade, which serves as an incentive for their effort. This theory suggests that the anticipation of rewards can influence decision-making and actions. Incentives can be both positive, like bonuses or compliments, and negative, such as penalties or criticism. Understanding this theory helps in various fields, including education, business, and psychology, to encourage desired behaviors.