\fThe possibly conicting nature of external intervention on behaviour has been formally analyzed in Chang and Lai (1999) and Bnabou and Tirole (2000). Figure 1 shows the interaction of the crowding-out effect and the price effect graphically. S is the traditional supply curve based on the relative price effect: raising the external reward for work effort form 0 to R increases work effort from A to A'. The crowding-out effect induces the supply curve to shift towards the left to S' . Thus, raising the reward from O to R leads to point C (instead of B). As the gure is drawn, the crowding-out effect dominates the relative price effect, and raising the reward from O to R reduces work effort from A to A\". Once intrinsic motivation has been crowded out completely, the normal supply curve takes over again, and raising the reward unequivocally increases work effort (movement along 8')