Multi-task incentive contract and performance measurement with multidimensional types

► We provide a new explanation for the dominance of the low-powered incentive contract over the high-powered one. ► We show that unobservable risk aversion or cost leads to low-powered incentives. ► We then consider the case that both risk aversion and cost of the agent are unobservable to the principal. ► It is shown that the principal is inclined to provide a low-powered incentive contract under certain conditions.