Suppose the average value that a person in a certain city places on having 1000 extra police of?cers out on the streets for a year is $10. Some people have a higher value and some a lower value. The population is 7 million. The city government decides to ask people how much they value an extra 1000 police to see if it is worth spending the $50 million a year needed. Two questionnaires are proposed. The ?rst version of the question- naire asks people to assess the value to them of the extra police and explains that people will pay whatever amount they answer-on the condition that the total of answers is at least $75 million. The second version of the questionnaire also asks people to reveal how much they value the extra police, but it says that everyone will pay the same amount if the police are hired, provided the sum of the personal valuations exceeds $75 million.
(a) What would be the results of the different surveys?
(b) Which is better?
(c) Does either survey give people the incentive to tell the truth?
(d) Can you devise a survey that does make people reveal the truth?