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Codes for rank modulation have been recently proposed as a means of protecting flash memory devices from errors. We study basic coding theoretic problems for such codes, representing them as subsets of the set of permutations of n elements equipped with the Kendall tau distance. We derive several lower and upper bounds on the size of codes. These bounds enable us to establish the exact scaling of the size of optimal codes for large values of n. We also show the existence of codes whose size is within a constant factor of the sphere packing bound for any fixed number of errors.