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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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  • Salvatore Piccolo & Giovanni Immordino, 2012. "Optimal Accomplice-Witnesses Regulation under Asymmetric Information," CSEF Working Papers 304, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:304
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    1. Antonio Acconcia & Giovanni Immordino & Salvatore Piccolo & Patrick Rey, 2014. "Accomplice Witnesses and Organized Crime: Theory and Evidence from Italy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(4), pages 1116-1159, October.

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    Keywords

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