The pric(z)e of hard work: Different incentive effects of non-monetary and monetary prizes

• Monetary incentives outperform non-monetary incentives regarding effort levels.
• Money links the intrinsic feeling of having fun at work to the resulting prize.
• Thus, work quality decreases and perceived work fun depends on the received prize.
• A large increase in the value of prizes does not decrease work quality.

Do non-monetary or monetary prizes induce the highest work performances in competitions? We conducted a real-effort lab experiment to test for differences in the effect of both incentives on work productivity. Our main findings are that the performances of subjects in pursuit of a monetary prize exceed those of subjects in pursuit of non-monetary incentives. However, the work quality and the retrospective feeling of having had fun at work, which is associated with the received prizes, decrease in combination with greater effort. Furthermore, a competition with monetary prizes appears to label winners and losers. If non-monetary prizes are used, losers are, to a certain extent, more able to adjust their feeling of satisfaction by changing the subjectively perceived prizes.