Publication Type
Journal Article
Version
submittedVersion
Publication Date
5-2025
Abstract
We study contract design when the principal has limited information about the output distributions induced by the agent's actions. In a baseline model where only the means are known, we show that increasing affine contracts are robustly optimal. The mean restrictions accommodate a wide range of output distributions, including extreme cases that help establish this optimality. We then extend the analysis to environments with additional constraints on the distributions. Our main result shows that the robust optimality of increasing affine contracts persists even when the principal knows more—for example, that each action induces a distribution with full support.
Keywords
Robust mechanism design, robust contracting, distributional uncertainty, monotone affine contracts, duality approach
Discipline
Economics | Economic Theory
Research Areas
Economic Theory
Publication
International Economic Review
First Page
1
Last Page
16
ISSN
0020-6598
Identifier
10.1111/iere.12780
Publisher
Wiley
Embargo Period
8-7-2023
Citation
LI, Jiangtao and WANG, Kexin.
Robust contracting under distributional uncertainty. (2025). International Economic Review. 1-16.
Available at: https://ink.library.smu.edu.sg/soe_research_all/23
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/iere.12780