Bohm (1982) reported a Swedish census project, which used a cost-sharing mechanism giving participants incentives to misrepresent their willingness to pay (WTP), yet still ended up providing a public good. In this paper we offer a theoretical analysis of the mechanism and propose two revisions. In the first revision, the incentives to overstate or understate are randomized, weakening participants’ tendency to misrepresent WTP. Whereas in the second revision, reporting true WTP is participants’ weakly dominant strategy. Our revisions delineate a simple approach to induce true WTP, while the Swedish mechanism can be treated as a special case.

In economic development, institutions and organizations are critical elements which can be looked upon as rules and players of a game, respectively. Investigating how institutions evolve and why certain organizations emerge may help us better understand economic development, especially when the situation requires an efficient solution. The problem of sovereign financing shares the features of one-sided Prisoner’ s Dilemma (PD). Sovereign default had been a common phenomenon in England since the medieval period; however, the establishment of the Bank of England altered the sovereign’ s incentives and helped build mutual trust between the crown and Parliament. In this paper, we analyze the emergence of the Bank by viewing it as a commitment device which makes the king’ s promise to pay trustworthy.