The everyday life of a city can generate informality in urban space, particularly in emerging economies. Using the grounded theory approach, this paper looks at how urban space in a market precinct is negotiated through tactics of street vendors and strategies of the government. It draws upon Herbert Simon’s work on decision making to show how a vendor moves from an existing situation to a preferred situation and terms this as situation satisfaction. It suggests a theoretical framework to understand the relation between the logic, decision and action of stakeholders to resolve the conflict between planning criteria and ground reality.