Abstract: I consider the problem a social planner faces in constructing a criminal justice system which addresses two needs: to protect the innocent and to punish the guilty. I characterize the socially optimal criminal justice system under various assumptions with respect to the planners ability to commit. In the optimal system, before a criminal investigation is initiated, all members of the community are given the opportunity to confess to having committed the crime in exchange for a smaller than socially optimal punishment, independent of any future evidence. Leniency for confessing agents is e¢ cient because there are informational externalities to each confession.
Keywords: leniency, criminal justice system, mechanism design, commitment power.
JEL: D82, K14