This paper presents two different strategies for difficulty adaptation in a competitive arm rehabilitation game: a manual adaptation strategy and an automatic performance-based adaptation strategy. The two strategies were implemented in a competitive game controlled with an inertial-sensor-based home rehabilitation device. They were first evaluated with 32 pairs of unimpaired participants, who played the game with manual adaptation, automated adaptation, or no adaptation. Each variant was played for 9 minutes. Then, the manual and automatic adaptation were also tested by 5 pairs consisting of a person with arm impairment (due to neurological injury) and their unimpaired friend or relative. Throughout the game, motivation was measured with questionnaires while exercise intensity was tracked using the inertial sensors. Results showed that both manual and automatic difficulty adaptation lead to higher motivation and exercise intensity than no adaptation. Unimpaired participants showed no clear preference between manual and automatic adaptation while 4 of 5 impaired participants preferred automatic adaptation. For future use, we propose a combination of manual and automatic adaptation that should be evaluated with more impaired participants in longer multisession experiments.