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Under Lorenzo's orders, Pedringano enters Saint Luigi's park with a pistol. He is intent on killing Serberine and hopes for good luck (literally, he asks Fortune to look kindly upon him). Unbeknownst to him, three watchmen enter the park nearby. Serberine then arrives for what he believes to be his eight o'clock rendezvous with Lorenzo. Pedringano sees him and shoots him dead. The watchmen hear the shot and quickly find and apprehend Pedringano, and they decide to take the murderer to the Knight-Marshal's house. He speaks defiantly to them, believing that Lorenzo will protect him from any possible harm.
Lorenzo and Balthazar have awoken early the next morning, and Balthazar wonders why Lorenzo seems so nervous. Lorenzo reveals his fear that both he and the prince have had their role in Horatio's murder exposed to Hieronimo. Balthazar chides him for being silly. A Page enters with news of Serberine's death the previous night. Balthazar is shocked and grieved by the news, for Serberine was his personal servant. When the page reveals that Pedringano committed the murder, Balthazar becomes enraged. Lorenzo assured Serberine that he will help Balthazar seek revenge against Pedringano, in a legal manner; Balthazar agrees that Serberine must be put to death for his crime and leaves to summon the meeting of Hieronimo's court so that the sentence can be carried out quickly. After Balthazar has left, Lorenzo reflects how well his plan is working; he will rid himself of both Serberine and Pedringano. A messenger then arrives with a letter from Pedringano, asking for Lorenzo's help now that he, Pedringano, has committed the murder that the Duke of Castile's son requested. Lorenzo tells the messenger to return to Pedringano and reassure him. After the messenger leaves, Lorenzo then gives the page (who announced Serberine's death) a box and tells the page to inform the murderer that the box contains his official pardon, already signed. But, says Lorenzo, the young boy must not look in the box, and in fact must not open the box for anyone on pain of death, even when Pedringano stands on the gallows. The page runs off, and Lorenzo congratulates himself on how only he knows the true intentions of his plans.
The page from the previous scene enters and speaks directly to the audience. He has, of course, opened the box and looked inside. And he has, of course, found nothing—the box is empty and contains no pardon. He believes that his lord's actions are dishonorable and reflects on how odd it will be to stand at the gallows, pointing at the box as if there were a pardon inside, while Pedringano mocks the proceedings, right up until the point he is hanged. But he still will go along with his master's deception, because he realizes that if he does not, then Pedringano will still die and he will die along with him.
These scenes present an interesting dramatic situation: the opposing action, in the form of Lorenzo's plot to eliminate all possible connections between him and the crime, becomes dominant, and Hieronimo, now clearly identified as the play's protagonist, fades into irrelevance. In fact, the only mention of Hieronimo in these scenes is in III.iv, when he is mentioned as the judge who will carry out the sentence on Pedringano. Again, the protagonist is entrapped in an ironic situation: he will be the agent of "justice" who will in fact enable Lorenzo to safely carry through his unjust plans.
These scenes also serve to confirm that Lorenzo, not Balthazar, is the main antagonist of the play. It is he who both devises and carries out his plans, alone, manipulating the emotions of others (even his accomplices in Horatio's murder) to serve his own ends. This can be seen in his dealings with Pedringano (whom he fools into killing Serberine) and Balthazar (whose outrage he uses against Pedringano). Lorenzo fits the character type of a Machiavellian villain, a private-sphere version of Machiavelli's ideal prince, as described in The Prince (1513). He utilizes the emotions of others to his own ends and never lets his own emotions get in the way of his plans and actions, which are motivated out of pure, calculating self-interest. To the English of Elizabethan times, Machiavellianism was a synonym for evil, so they would have been filled with the appropriate disgust for Lorenzo's actions. This is not to say that on a certain level they would not admire his cleverness: indeed, Kyd again seems to exploit the nature of the stage-audience relation to create ambivalence between audience and character, a "double perspective", in which Lorenzo is both someone to be scorned for his evil, yet admired for his wit and decisiveness. This very decisiveness and action contrasts with Hieronimo's indecisiveness and inaction at this stage, increasing the dramatic tension as we wonder whether Hieronimo will ever find the justice he deserves and whether Lorenzo and Balthazar will not simply manage to escape unpunished.
Read more about the motif of Machiavellianism.
But even Lorenzo is not free from dramatic irony. His entire plan is based on the false belief that Serberine informed Hieronimo about the identity. This is an important fact, because it indicates that Lorenzo is fallible, and human: he lacks complete information. And this lack will eventually prove his downfall.
Much critical interpretation of this scene has focused around the symbolism of Lorenzo's empty box. G.K. Hunter interprets the box as a cynical symbol of man's hope for justice. This fits in nicely with the current thematic emphasis of the play, which focuses around Hieronimo's search for justice: Pedringano believes that he has found his justice in the black box. The emptiness of the box not only proves Pedringano wrong on a literal level, it can be seen to express metaphorically Hieronimo's doubts about the possibility of justice ever being achieved. Frank Ardolino has seen the box as a type of inverted Pandora's box, out of which evil comes in the form of nothingness (as opposed to the plethora of things—including hope, disease and suffering—that came out of the box in the Greek legend).
Whatever the box may symbolize, it sets up a situation again full of dramatic irony. Lorenzo has plotted carefully to have Pedringano condemned to death, but Pedringano still looks to his lord as a possible source of salvation; Lorenzo now cruelly uses this false belief to ensure that Pedringano will stay silent in front of Hieronimo. And Pedringano's silence places Hieronimo in the position of carrying out "justice" upon Pedringano in the form of an execution. This situation is doubly ironic, first since Hieronimo himself is unable to find justice in his own life, yet is now charged with carrying out justice upon others. But it is also ironic because, in believing that he carries out justice, Hieronimo actually carries out an injustice that, by destroying the last living link between Lorenzo and the crime (besides Balthazar), may prevent him from ever finding the justice he seeks. This is a situation that, like most instances of dramatic irony, is rife with both tension and a grim sort of humor, as the audience watches while a sympathetic character unwittingly brings about his own failure, observing how easily the best intentions of men are turned against themselves.
Read more about Kyd’s use of dramatic irony to drive a wedge between the world as his main characters see it and the world as it actually is.
A small formal note: Lorenzo's page speaks entirely in prose. The Elizabethan literary convention was that "low" characters (low in social standing) would often speak prose, while their social superiors spoke verse. In the page, the prose can also be seen to indicate a low moral character, as he almost seems to laugh at the deception being played on Pedringano.