Procurement contracts are often renegotiated because of changes that are required after their execution. Using highway paving contracts we show that renegotiation imposes significant adaptation costs. Reduced form regressions suggest that bidders respond strategically to contractual incompleteness and that adaptation costs are an important determinant of their bids. A structural empirical model compares adaptation costs to bidder markups and shows that adaptation costs account for 7.5–14 percent of the winning bid. Markups from private information and market power, the focus of much of the auctions literature, are much smaller by comparison. Implications for government procurement are discussed. (JEL D44, D82, D86, H57, L13, L74, R42)

Procurement contracts are often renegotiated because of changes that are required after their execution. Using highway paving contracts we show that renegotiation imposes significant adaptation costs. Reduced form regressions suggest that bidders respond strategically to contractual incompleteness and that adaptation costs are an important determinant of their bids. A structural empirical model compares adaptation costs to bidder markups and shows that adaptation costs account for 8-14 percent of the winning bid. Markups from private information and market power, the focus of much of the auctions literature, are much smaller by comparison. Implications for government procurement are discussed. JEL classifications: D23, D82, H57, L14, L22, L74. * We thank Liran Einav,

We measure the effects of chain economies, business stealing, and heterogeneous firms' comparative advantages in the discount retail industry. Traditional entry models are ill-suited for this high-dimensional problem of strategic interaction. Building upon recently developed profit inequality techniques, our model admits any number of potential rivals and stores per location, an endogenous distribution network, and unobserved (to the econometrician) location attributes that may cause firms to cluster their stores. In an application, we find that Kmart and Target benefit most from local chain economies; Wal-Mart's advantage is more global. We explore these results with counterfactual simulations highlighting these offsetting effects.

The purpose of this special issue is to bring the theory of intercultural citizenship education to readers' attention and to offer teachers and researchers working with this or similar concepts the opportunity to make their work known in a context of a coherent presentation of theory and practice. In this introduction, we will explain the rationale and the concepts involved in intercultural citizenship education and present the articles in this special issue which arose from our call for papers.

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