What’s a better motivator: the carrot or the stick?

Team leaders often provide incentives for cooperation. A challenging question is how different incentive schemes and their actual choice by the leader shape the teamâs culture and contribute to the teamâs success. To shed light on this issue we investigate how a leader chooses between rewards or punishment in an experimental team setting and how teammatesâ contributions are influenced by this choice. Leaders show a clear initial preference for rewards, which diminishes over time in some teams. Leaders who observe more free-riders in their teams tend to switch to punishment incentives. A change from rewards to negative incentives results in an immediate and enduring increase in contributions. On the other hand, contributions show a decreasing trend in teams with a leader who sticks to rewards.

Source: “Motivating teammates: The leaderâs choice between positive and negative incentives” from Journal of Economic Psychology, Volume 30, Issue 4, August 2009, Pages 591-607