Market exchange requires a combination of both state and customary institutions. For any developed system of commodity exchange there must be a legal… - Geoffrey Hodgson

We shall here define the market as a set of social institutions in which a large number of commodity exchanges of a specific type regularly take place, and to some extent are facilitated and structured by those institutions. Exchange as defined above, involves contractual agreement and the exchange of property rights, and the market consists in part of mechanisms to structure, organize and legitimate these activities. Markets, in short, are organized and institutionalized exchange. Stress is placed on those market institutions, which help to both regulate and establish a consensus over prices and, more generally, to communicate information regarding products, prices, quantities, potential buyers and potential sellers.

The use of the term institution has become widespread in the social sciences in recent years, reflecting the growth in institutional economics and the use of the institution concept in several other disciplines, including philosophy, sociology, politics, and geography. The term has a long history of usage in the social sciences, dating back at least to in his Scienza Nuova of 1725. However, even today, there is no unanimity in the definition of this concept. Furthermore, endless disputes over the definitions of key terms such as institution and organization have led some writers to give up matters of definition and to propose getting down somehow to practical matters instead. But it is not possible to carry out any empirical or theoretical analysis of how institutions or organizations work without having some adequate conception of what an institution or an organization is. This paper proposes that those that give up are acting in haste; potentially consensual definitions of these terms are possible, once we overcome a few obstacles and difficulties in the way. It is also important to avoid some biases in the study of institutions, where institutions and characteristics of a particular type are overgeneralized to the set

It is because prices are stable, and are perceived by agents to be in equilibrium, that the task facing market institutions is less daunting in this respect. However, market institutions may still have many other functions, such as providing information regarding quality and the location of potential buyers and sellers, and regulating both the product and the entrants to the market. In fact, a crucial function may be more subtle; by ordering trade under the aegis of some institution, the price and quality of the product may be legitimized at its given level. There is a kind of stamp of institutional approval which may contribute in a powerful manner to the emergence of price norms…..