The optimal duration of a supply contract balances the costs of re-selecting a supplier against the costs of being … matched to an inefficient supplier when the contract lasts too long. I develop a structural model of contract duration that … using federal supply contracts for a standardized product, where suppliers are selected by procurement auctions. The …

Using a sample of long-term supply contracts collected from SEC filings, I show that hold-up concerns and information … asymmetry are important determinants of contract design. Asymmetric information between buyers and suppliers leads to shorter … term contracts. However, when longer duration contracts facilitate the exchange of relationship specific assets, the …