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Compliance and Incentive Contracts

  • Daniel HeroldEmail author
Chapter

Abstract

In the discussion of competition law compliance programmes it is important to address the internal delegation problems within the firm. Hard core cartels are typically triggered by economic developments having a strong impact on industry profits, and are formed on a higher level of the firm’s hierarchy. One way to control managerial behaviour is by designing incentive contracts. This chapter argues that compliance measures such as training programmes or internal monitoring should be complemented by an appropriate design of incentive pay. Insights from the economic literature on agency problems and cartels show that particularly profit thresholds that must be met to receive a bonus and bonus caps have a crucial impact on managerial incentives to engage in collusive activity. Properly designed incentive contracts complement other compliance measures and improve deterrence.

Keywords

Compliance Corporate crime Principal-agent Antitrust 

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Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  1. 1.Department of EconomicsJustus Liebig University Giessen, VWL I - Industrial Organization, Regulation and AntitrustGiessenGermany

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