I happened to read Anton Sherwood's blog the other day. In http://www.ogre.nu/wp/?p=1642 he mentioned several things that he had "almost invented", i.e. he'd invented them independently and then discovered they were already well-known.
One was Alex Tabarrok's dominant assurance contracts; another was a way of building e.g. railroad right-of-way without eminent domain and without having to pay outrageously high prices to the last landowner on the route, a way which turns out (Anton said) to be standard practice for laying pipelines. The technique is: buy call options on parcels of land until you make a path; then exercise the options along that path. This way you handle the increasing-returns nature of the land ownership more smoothly. It occurred to me today, as I was explaining this technique today, that dominant assurance contracts are similarly a way to handle an increasing-returns problem, and can actually be explained in the same way. The escrow agent (or "entrepreneur," as Tabarrok calls him) is offering the amount $F to buy a "put" option for the existence of the public good he is trying to provide, at exercise price $S. So, perhaps, he is offering a "put" option for the existence of a bridge at exercise price $100, which is probably a pretty good deal.
