This chapter explains the theoretical perspective by arguing that there may be a degree of congruence between formal and informal institutions on the question of compliance to tax regulations. It shows that there are degrees of informality, and instead of moving away from formal and informal as binaries, they are better viewed as two ends of a continuum with re-enforcing influence on each other. The chapter presents an ideal-type distinction of marketplaces by separating formal and informal marketplaces or bazaars in terms of the degree of formality-informality of their governance. It reviews the literature on marketplace-local government's interaction to develop an interactional framework that explains the role of Batkhela Bazaar and its traders association in the governance structure of the region. The chapter outlines the methodology of the research. It also presents empirical findings from the case study of Batkhela Bazaar, Pakistan.