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Optimal Accomplice-Witnesses Regulation under Asymmetric Information

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Abstract

We study the problem of a Legislator designing immunity for privately informed cooperating accomplices. Our objective is to highlight the positive (vertical) externality between expected returns from crime and the information rent that must be granted by the Legislator to whistleblowers in order to break their code of silence (omertà) and elicit truthful information revelation. We identify the accomplices' incentives to release distorted information and characterize the second-best policy limiting this behavior. The central finding is that this externality leads to a second-best policy that purposefully allows whistleblowers not to disclose part of their private information. We also show that accomplices must fulfill minimal information requirements to be admitted into the program (rationing), that a bonus must be awarded to accomplices providing more reliable information and that, under some conditions, rewarding a self-reporting `boss' can increase efficiency. These results are consistent with a number of widespread legislative provisions.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 304.

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Date of creation: 11 Jan 2012
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Handle: RePEc:sef:csefwp:304

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Keywords: Accomplice-witnesses; Adverse Selection; Leniency; Organized Crime;

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  1. Massimo Motta & Michele Polo, . "Leniency Programs and Cartel Prosecution," Working Papers 150, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Kugler, Maurice & Verdier, Thierry & Zenou, Yves, 2003. "Organized Crime, Corruption and Punishment," CEPR Discussion Papers 3806, C.E.P.R. Discussion Papers.
  3. Konrad, Kai A. & Skaperdas, Stergios, 1997. "Credible threats in extortion," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 23-39, May.
  4. Acconcia, Antonio & Immordino, Giovanni & Piccolo, Salvatore & Rey, Patrick, 2013. "Accomplice-Witness and Organized Crime: Theory and Evidence from Italy," IDEI Working Papers 777, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Heski Bar-Isaac & Mariagiovanna Baccara, 2006. "How to Organize Crime," Working Papers 06-07, New York University, Leonard N. Stern School of Business, Department of Economics.
  6. Sauvagnat, Julien, 2010. "Prosecution and Leniency Programs: a Fool's Game," TSE Working Papers 10-188, Toulouse School of Economics (TSE).
  7. Zhijun Chen & Patrick Rey, 2013. "On the Design of Leniency Programs," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 917 - 957.
  8. Bruce H. Kobayashi, 1992. "Deterrence with Multiple Defendants: An Explanation for "Unfair" Plea Bargains," RAND Journal of Economics, The RAND Corporation, vol. 23(4), pages 507-517, Winter.
  9. Abdalla Mansour & Nicolas Marceau & Steeve Mongrain, 2001. "Gangs and Crime Deterrence," Cahiers de recherche CREFE / CREFE Working Papers 138, CREFE, Université du Québec à Montréal.
  10. Backhaus, Jürgen G., 1979. "Defending organized crime? A note," Discussion Papers, Series 1 120, University of Konstanz, Department of Economics.
  11. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
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Cited by:
  1. Acconcia, Antonio & Immordino, Giovanni & Piccolo, Salvatore & Rey, Patrick, 2013. "Accomplice-Witness and Organized Crime: Theory and Evidence from Italy," IDEI Working Papers 777, Institut d'Économie Industrielle (IDEI), Toulouse.

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