Based on the impact of contract duration on the supplier’s willingness to accept a contract, this paper uses the real option theory to analyze the supplier’s fixed price and price of gain sharing contract under cost uncertainty and elastic demand. The impacts of contract duration, optimism and overconfidence on these decisions are underlined. Results show that the contract duration determines the pricing function of the fixed price, while the negotiation power threshold affected by the contract duration determines the pricing function of gain-sharing contract. When the duration of the fixed price contract is relatively long (the supplier’s negotiation power is relatively low), the supplier’s fixed price (price of gain sharing contract) is her reservation price so as to ensure an optimal timing to exercise contracts. This price is lower because of overconfidence, but it is not necessarily lower due to optimism. When the contract duration is relatively long or the supplier’s negotiation power is relatively high, the supplier decides her price based on demand elasticity. This price decreases with the supplier’s optimism and is not affected by overconfidence.