Antonio Acconcia, Giovanni Immordino, Salvatore Piccolo, and Patrick Rey, “Accomplice-Witness and Organized Crime: Theory and Evidence from Italy”, The Scandinavian Journal of Economics, vol. 116, n. 4, October 2014, pp. 1116–1159.
We develop an agency model of organized crime accounting for the main trade-offs involved by the introduction of an accomplice-witness program. We characterize the optimal policy and identify its main determinants in a framework where public officials can be dishonest. Our predictions are tested by using data for Italy before and after the introduction of the 1991 accomplice-witness program. As predicted by the model and the earlier antitrust literature, the program appears to have strengthened deterrence and enhanced prosecution. Moreover, consistently with a novel prediction of our theory, the evidence suggests that the program efficacy is affected by the judicial system efficiency.