Basic human sociology experiments have proven that, whilst initially offering a reward encourages performance of a behaviour, once that reward has been offered the human mind ceases to think of an activity as enjoyable, and begins on some level to think of it as "work".
I think that depends on the individual. Some people might find modding intrinsically rewarding, or a self-rewarding behavior. So they repeat it simply because they like to do it, and if they get something external out of it, so be it.
I think the possibility of a lack of sharing due to fear someone will use your work to win a contest or the concerns about rewarding whole teams or blatant stealing with only cosmetic changes would be more limiting concerns.