Organized Crime, Insider Information and Optimal Leniency

When low-rankcriminals are o⁄ered the option to cooperate with the justice in exchange of judicial leniency, their insider information generates ex-post rents that may actually favor their heads and increase the crime protability. Hence, an optimal leniency policy must trade o⁄ the positive impact of helpful disclosure of insider information and the positive externality that these rents exert on the organizations returns from crime. Due to this tension, the amnesty that minimizes the probability of crime induces the Legislator to ration the access to the program, by excluding informants owning potentially useful insider knowledge. This rationing result survives to a number of robustness checks, which include the case of multiagent organizations, the possibility of self-reporting by the boss, the presence of career concerns and the introduction of an endogenous information structure.