A Comparison of the Effects of Incentive and Penalty Procedures on Work Performance: A Simulation

Abstract

This study compared the effects of incentive and penalty on work performance. In Experiment 1, participants in the incentive group could earn 50 won (approximately 5 cents) for correctly completing each task and those in the penalty group could lose 50 won for incorrectly completing each task. The incentive and penalty did not exert differential impacts on work performance. In Experiment 2, participants were randomly assigned to one of six experimental groups: incentive, penalty, and no reward groups under two different consequence delivery schedules. Under the continuous condition, the payment was determined in the same way as in Experiment 1. Under the VR 5 condition, 250 won was either added or deducted based on a VR 5 schedule. The effects of the incentive and penalty were comparable under the continuous condition. However, the incentive was more effective than the penalty under the VR 5 condition.