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 … costs. Counterfactuals illustrate the importance of accounting for the duration margin …

We study the optimal duration of contracts in a principal-agent framework with both moral hazard and adverse selection …. Agents decide on a contract-specific and non-verifiable investment. Incentive compatibility requires that initial contracts …