> Escrow is sometimes a good solution<p>Escrow would be a great solution for rental security deposits. However rental agreements are drafted by landlords and are contracts of adhesion. If a tenant wants to negotiate the contract, the landlord will simply reject the negotiation and find another perspective tenant.<p>You could write into landlord and tenant law that escrow is required for security deposits, but landlords are generally more wealthy, stable and politically connected than tenants are and would be able to stop changes at many steps in the legislative process.<p>The problem with setting up more sane incentives to overcome game theory problems is that you have to implement it, and you get back into all the gnarled game theory with incentives and human unpredictability.