Mobile devices, such as mobile phones and personal digital assistants, have gained wide-spread popularity. These devices will increasingly be networked, thus enabling the construction of distributed mobile applications. These have to adapt to changes in context, such as variations in network bandwidth, exhaustion of battery power or reachability of services on other devices. We show how the construction of adaptive and context-aware mobile applications can be supported using a reflective middleware. The middleware provides software engineers with primitives to describe how context changes are handled using policies. These policies may conflict. In this paper, we classify the different types of conflicts that may arise in mobile computing. We argue that conflicts cannot be resolved statically at the time applications are designed, but, rather, need to be resolved at execution time. We demonstrate a method by which these policy conflicts can be treated. This method uses a micro-economic approach that relies on a particular type of sealed-bid auction.