Risk Aversion and Information in Robust Contracting
We study hidden-action contracting with a risk-averse agent and partial knowledge of actions in a compact convex envelope of distribution--cost pairs. With finitely many outcomes and bounded deterministic wages, the principal's worst-case payoff admits an exact dual representation with an endogenous $f$-divergence governed by transfer utility and an incentive multiplier. Under strictly concave utility, finite-multiplier branch optima follow a truncated likelihood-ratio rule, including at zero-probability outcomes. To address nonattainment induced by adversarial tie-breaking, we characterize…
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