[A study is made of a competitive trading process in which a specific price-maker calls prices periodically under the obligation of supporting these prices by trading for his own account to satisfy excess demand. Specifically, the paper considers price formation in an organized securities exchange using the specialist system to facilitate trading. Following procedures developed in an earlier study, characteristics of the price-maker's optimal behavior are derived. These characteristics are used to obtain properties of stationary distributions of market prices and to compare the operation of the specialist system with an alternative market clearing system.]

[The problem of the individual's consumption and portfolio choices over time has been the focus of recent studies by a number of authors. An attempt is made here to extend these results by examining the impact of transaction costs on optimal consumption and portfolio decisions. We are able to show that these costs considerably modify available results and greatly increase the difficulty of analyzing the consumer choice problem. The major reason is that now not only wealth, but also the composition of wealth, becomes important in the decision making process. To keep the exposition reasonably manageable we consider only a constant relative risk averse utility function and confine explicit attention to a two-period horizon. Since it is now necessary to examine portfolio choices in detail, we limit portfolio opportunities to a riskless asset, cash, and a risky asset, stock, with a random return. We assume proportional transaction cost for purchases or sales of stock. Wealth is taken to be the sum of cash and stock at the beginning of a period, while income is assumed to be zero, or included in initial wealth.]