ABSTRACT
This chapter considers the opposite of the Walrasian call market, a continuous-trading dealer market in which official or registered dealers are obliged to quote bid-ask prices at which they are willing to trade at minimum size. Economic theory has never had a great deal to say about markets, much less about financial markets, and even less to say about changes in institutional structures. Call markets thus have low capital requirements, and rates of return will be relatively unimportant in determining its costs of operation. The most common approach to the problems of how to incorporate variable and evolving markets into analysis has been via "transactions costs" of organized markets. At the beginning of the twentieth century, the specialist system was the natural response to the difficulties created by rapid expansion in the extent of the market. Dealer markets might then be called "capital intensive" forms of making market prices.
