Informal Sanctions on Prosecutors and Defendants and the Disposition of Criminal Cases

We model the strategic interaction between a prosecutor and a defendant when non-strategic outside observers rationally use the case disposition (plea bargain, dropped case, acquittal, or conviction) to impose informal sanctions on both parties. Outside observers recognize that error in the legal process (as well as hidden information) means they may misclassify defendants and thereby impose sanctions erroneously. We show that: (1) changes in the level of the formal sanction affect the level of informal sanctions imposed and (2) increases in the informal sanction rates imposed on prosecutors result in changes in the level of informal sanctions imposed on defendants. We also extend the model to allow for a three-outcome verdict (not guilty, not proven, and guilty), sometimes referred to as the “Scottish” verdict. We find that the Scottish verdict is justice-improving in that it benefits innocent defendants, outside observers, and prosecutors in comparison with the standard (two-outcome) verdict. (<it>JEL</it> K4, D8)