STORES

There is scope and incentive for ''stores'' to endogenously arise in a n exchange economy when agents possess different levels of bargaining power and coalition formation is costly. In the absence of stores, age nts face a trading lottery where the expected outcome for an individua l agent depends upon his relative bargaining strength. By setting appr opriate, preannounced prices, a store can profitably offer relatively weak bargainers trading opportunities which they prefer to the trading lottery. While relatively weak bargainers are attracted to the store, relatively strong bargainers prefer the trading lottery to the store. Thus, the simultaneous existence of barter and mediated trade is expl ained.