bertrand model of oligopoly ppt

Oligopol. 9-3 Oligopoly Environment § Relatively few firms, usually less than 10. 14.7 Bertrand Oligopoly Model • Assumptions of the model: •Firms have identical costs (and constant MC=$5) •Firms produce identical goods • Conditional on the price charged by Firm 2, p 2, Firm 1 wants to charge slightly less in order to attract customers. § Many different strategic variables are modeled: – No single oligopoly model. It is a duopoly model similar to the duopoly model developed by Joseph Bertrand , in which two firms producing the same good compete in terms of prices. Each firm chooses its quantity as the best response to the quantity chosen by the other(s). There are few firms in the market serving many consumers. Oligopoly Models Patrick Bajari Econ 4631 Patrick Bajari Econ 4631 Oligopoly Models 1 / 55. Bertrand’s Duopoly Model: Cournot assumes that the duopolist takes his rivals’ sales as constant … Conditions for Oligopoly? When these firms get together and agree to set prices and outputs so as to maximise total industry profits, they are known as a cartel. The firms set quantities sequentially. OLIGOPOLY - Collusive oligopoly Model Temptation to Collude When a small number of firms share a market, they can increase their profit by forming a cartel and acting like a ... | PowerPoint PPT presentation | free to view . The firms produce either differentiated or homogeneous products. There are Two firms in the market, A and B 2. 1 2. Perhaps the best known is the Cournot model. The Bertrand model demonstrates the importance of the strategic variable (price versus output). The Adobe Flash plugin is needed to view this content. Hence … – Duopoly - two firms – Triopoly - three firms § The products firms offer can be either differentiated or … stream Cournot’s duopoly. Firms decide what . Prices would cycle within some bounds and the extent of the indeterminacy would … COOPERATIVE BEHAVIOR: Cartel Cartel: A collusive arrangement made openly and formally I Cartels, and collusion in general, are illegal in the US and EU. PPT – Oligopoly PowerPoint presentation | free to download - id: 72511c-NmEwN. Role of Strategic Interdependence III. Oligopoly Keem Quevedo. Get the plugin now. Stackelberg’s Duopoly 5. There are two primary types of duopolies: the Cournot Duopoly (named after Antoine Cournot) and the Bertrand Duopoly (named after Joseph Bertrand). 4 0 obj Oligopolies can result from various forms of collusion which reduce competition and lead to higher prices for consumers. Es handelt sich um eine Weiterentwicklung des Cournot-Oligopols.Der wesentliche Unterschied ist dabei, dass der Preis und nicht die Menge als strategische, durch die Unternehmen simultan festgesetzte Variable verwendet wird; es handelt sich … �T�I%)%�[��5������D���w(}�pg���y���$�a����\�������I)I$�JRI$���I$�$�۪u���i���4:v9��M߱��R�I$�� ���T�I%_U��c�{���>�_�m��g���hx'�����]x�9V�XzU���lv������k�g�}��]�Hp��E�~�՛��oX�����m�<1�s[���eL�~��ʨ龶����Uޣ����+�����O���+>˝��=�^�K����ub���b=�o�k�Yy}K/2ʃ+��r �[�@=ߣ�=�zl�#Uѹ�_���Պ����a4�q�pw���nE}/+������L������=+u�]����Ȯ�cӿgS,��[Nc�cv�����1����Ս���ܷG�\G7s*������K=g�Ƕ���~����� �ё}t��Zos�ph�+/fE�w�cis=���?MRh��ZLf�O9�w]y�k�WfXoLƪ���V+��k�eV?��d^̚-�c��_�?�׫�. ���� JFIF H H ���Exif II* n v ( 1 ~ 2 � ; � i� � � �� Bertrand’s oligopoly Model The oligopoly (duopoly) model developed by Joseph Bertram in 1883 was a modification upon Cournot’s duopoly solution. Chapter 7 Market structure.ppt - Free download as Powerpoint Presentation (.ppt), PDF File (.pdf), Text File (.txt) or view presentation slides online. Assumptions of the Cartel Model: For the sake of […] Classic Oligopoly Models: Bertrand and Cournot. The Edgeworth duopoly model, also known as Edgeworth solution, was developed by Francis Y. Edgeworth in his work “The Pure Theory of Monopoly”, 1897. Cournot’s Duopoly Model: Cournot founded the theory of duopoly. In a Cournot equilibrium, the price-cost margin of each firm is that firm’s market share divided by the elasticity of demand. Chamberlin’s Small Group Model 4. The most important barriers are economies of scale, … Depending on the industries, ones are more adequate than others. This means that for each level of firm 1’s output (q 1), firm 2 will choose the level of output (q 2) that put it on the iso-profit curve farthest to the left as illustrated in Fig. Cournot’s model of oligopoly is one of the oldest theories of the behaviour of the individual firm and relates to non-collusive oligopoly. As a price taker, a firm will produce where price equals long-run marginal costs. 3 !1AQa"q�2���B#$R�b34r��C%�S���cs5���&D�TdE£t6�U�e���u��F'���������������Vfv��������7GWgw�������� 5 !1AQaq"2����B#�R��3$b�r��CScs4�%���&5��D�T�dEU6te����u��F���������������Vfv��������'7GWgw������� ? Actions. 46 Price Competition Bertrand Model. endstream <> In the Bertrand model of duopoly, each firm sets its price, believing that the other's price will not change.When both firms have identical production functions and produce with constant returns to scale, the Bertrand equilibrium price is equal to marginal cost. F�;�?We������Hg��7�&��aW��p�o� ��(Ѝy�+7qR��FI_߃�e\����s��2��c��֬ Oo�,סi`�1c�P��թ��ױK�ji��P6���Z����ADk#�ӳ&,*�z(ۨ:j;�^�e�^{Ɏ[`[�*���?Z8���B�R���-��l�Ζ(E���y�=�H� Bertrand competition with homogeneous products • n firms • Constant marginal costs c i >0 • Each firm set price p i simultaneously and independently • Linear demand Q=A-Bp where p=min[p 1,.., pn] • Consumers buy only from firms with the lowest prices. Keywords: oligopoly, duopoly, game theory, discrete strategies, mixed strategies, Cournot, Bertrand. An example showing the conditions required for the grim trigger strategy to sustain collusion in the Bertrand model of oligopoly. The second firm’s quantity is the best response to the first firm’s quantity. The firms set quantities sequentially. In Cournot model it is assumed that an oligopolist thinks that his rival will keep their output fixed regardless of what he might do. As a price taker, a firm will produce where price equals long-run marginal costs. ... PowerPoint Presentation Author: Pantuosco, Louis J Last modified by: Pantuosco, Louis J Created Date: 1/1/1601 12:00:00 AM In the figure above, KPD is the is the kinked-demand curve and OP 0 is the prevailing price in the oligopoly market for the OR product of … Quasi-Competitive Model A model of oligopoly pricing in which each firm acts as a price taker even though there may be few firms is a quasi-competitive model. Bertrand Model Critical Analysis Assumes firms compete purely on price, ignoring non-price competition such as quantity, promotion, place Assumes that sales are divided equally among the competing firm and that the firm,in undercutting its competitor, is able to meet the full demand of the market. II. The analysis of Nash equilibria in each model reveals a unique prediction about the stable state of the system. ,���� � [Content_Types].xml �(� Ě�r�0��;�w������6I;@.z��!3I@�Pc�KPx����0N�"k�"L��_�J�_�er�)�h �╘�4���ʹXL�__G7q�49+*�x*���~5y�JP��-�4^j-?��%�L%�a�̫�d�4��,{d �x|E�Jhz��x6�s�*t�ec�ޑ@9��O�����1/���Qs����#a�۩��ߧ�B��aR. another famous oligopoly model is a French scientist as well – J. Bertrand, who presented the model of price competition in a duopoly market in 1883. two animals fighting over prey ... | PowerPoint … Cournot model Yagnesh sondarva. View (W1-V1) Undifferentiated Oligopoly.pptx from ECON MISC at St. John's University. Each firm chooses its price as the best response to the price chosen by the other(s). %PDF-1.5 Conclusion: The Bertrand model is an extreme case. In this model the firms move sequentially (see Stackelberg competition). Lecture-140 Bertrand Model of Duopoly - Duration: 16:02. 2 0 obj For example, would someone travel twice as far to save 1% on the price of their vegetables? Oligopoly – Model Specification Games and Decisions Jan Zouhar 4 to make the analysis simple, we’ll make several assumptions: 1. single-product model: oligopolists produce a single type of homogenous product 2. one strategic variable: firms decide about prices or output levels 3. static model: single-period analysis only in dynamic models, there are more diverse strategic options: In this model the firms simultaneously choose prices (see Bertrand competition). 3 0 obj – Duopoly - two firms – Triopoly - three firms § The products firms offer can be either differentiated or homogeneous. When the marginal cost is same, it is in the best interest of each firm in oligopoly to undercut its rival (i.e. Oligopoly Introduction Three models of oligopoly. A Cournot equilibrium is a Nash equilibrium to the Cournot model. Topic: Comparing Oligopoly Models 51. The Bertrand model … His model differs from Cournot’s in that he assumes that each firm expects that the rival will keep its price constant, irrespective of its own decision about pricing. C. rivals will decrease output whenever a firm decreases its output. For example, it assumes that consumers want to buy from the lowest priced firm. Patrick Bajari Econ 4631 Oligopoly Models 23 / 55. 2. The homogeneous-products Bertrand model of oligopoly applies when firms in the oligopoly produce standardized products at same marginal cost. Firms selling identical spring water. 9-3 Oligopoly Environment § Relatively few firms, usually less than 10. 4 Oligopoly models • There are three dominant oligopoly models: – The relevant variable of choice for firms is how much to produce and sell, then the market adjusts the price, e.g. The Bertrand theory of oligopoly assumes: A. firms set prices. beat its … ' �� •The Bertrand competition model describes an oligopoly in which each firm chooses the price of its product. endobj The War of Attrition Two parties involved in a costly dispute E.g. Das Modell dazu erfordert einige Annahmen. ADVERTISEMENTS: In a model of collusive oligopoly, we discuss the economics of agreement between the firms in an undifferentiated oligopolistic industry. True False . Cournot’s Duopoly Model 2. #2 Bertrand-Nash Duopoly StructureA Non-cooperative Outcome in Prices. COOPERATIVE BEHAVIOR: Cartel Cartel: A collusive arrangement made openly and formally I Cartels, and collusion in general, are illegal in the US and EU. k > p1/p2; Keines der … Residual Demand Thus, even if the aggregate demand curve P(Q) is quite inelastic, it may be the case that residual demand in very elastic From the perspective of the –rm, the important thing in determining output is the elasticity of residual demand, not aggregate demand! Topic: Comparing Oligopoly Models 51. Contestable Markets . 4 Oligopoly models • There are three dominant oligopoly models: – The relevant variable of choice for firms is how much to produce and sell, then the market adjusts the price, e.g. Explanation of the Kinked-Demand Curve Model. MGEC 612 Undifferentiated Oligopoly OUTLINE Introduction: Undifferentiated vs Differentiated Oligopoly Bertrand Ability to set price: Oligopolies are price setters rather than price takers. Industrial Organization-Matilde Machado The Hotelling Model 10 4.2. In the previous section we studied oligopolists that make an identical good and who compete by setting quantities. %���� in sectors where the marginal cost is high and adjusting the quantities requires time and money like agriculture, cars (Cournot) – The relevant variable is the price chosen by the firms and then the market adjusts the quantity that … Basic Oligopoly Models. The chief characteristic of oligopoly is the interdependence among the rival sellers. 9-3 Oligopoly Environment Relatively few firms, usually less than 10. The cost of production is zero 4. to post on the market. Bertrand Model. The example we used in that section was wholesale gasoline where the market sets a price that equates supply and demand and the strategic decision of the refiners was how much oil to refine into gasoline. In the Cournot model, firms choose quantities simultaneously and independently, and industry output determines price through demand. The model has been successful to help understanding international trade under more realistic assumptions. Economics • Humanities & Social Sciences. Quiz 28: Oligopoly; In the Bertrand Model of Duopoly, Each Firm Sets Its. x��T�n�0}7��T �D]l=f�Zl��ЇbY�&;�� ����(_�8�a2@���&��&��R*D�A���P�4y����"WH!���J�z����)iF��4�O��4��!R"�)r�ԉZg"�@�` Oligopoly Presentation bmiles1317. Oligopoly: Price leadership, its types and difficult PETER FRANCIS MILLANZI. Cournot competition Bertrand competition Stackelberg competition Cournot Competition An industry is characterized as Cournot oligopoly if 1. 6 Industrial Organization-Matilde Machado The … Characteristics: Profit maximization conditions: An oligopoly maximizes profits by producing where marginal revenue equals marginal costs. Duopoly an oligopoly of 2 firms. List of oligopoly models: 1. I Cartels maximize pro t by restricting the output of member rms to a H H ���� JFIF H H �� Adobe_CM �� Adobe d� �� � The Bertrand model rests on some very extreme assumptions. Contestable Markets. The Adobe Flash plugin is needed to view this content. The second firm follows by setting a price. Oligopoly  Market has a small number of sellers  Pricing and output decisions by each firm affects the price and output in the industry  Oligopoly models (Cournot, Bertrand) focus on how firms react to each other’s moves 11. Even if the firms do set prices and choose the same price, what share of total sales will go to each one? AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy Learning Objective: 09-02 Identify the conditions under which a … … In this model the firms simultaneously choose quantities (see Cournot competition). Micro Economics - IITK 2,259 views. His duopoly model consists of two firms marketing a homogenous good. stream The first firm sets a quantity. 5 0 obj Contestable Markets. In the Bertrand model, firms compete with price. Nun sind mehrere Fälle verschiedener Preise denkbar: Kein Unternehmen wird unter den Grenzkosten anbieten, da es hier Verluste macht. B. rivals will increase their output whenever a firm increases its output. Firms make identical products. 9-3 Oligopoly Environment Relatively few firms, usually less than 10. Therefore, no single, uni ed model of oligopoly exists I Cartel I Price leadership I Bertrand competition I Cournot competition Managerial Economics: Unit 6 - Oligopoly4/ 45. In Bertrand’s model of oligopoly. Once we introduce more realistic assumptions the competition softens and the equilibrium price is higher than marginal cost The oligopoly models do not have to be the same for all industries. Role of Strategic Interdependence III. Cournot’s Duopoly Model: Augustin Cournot, a French economist, was the first to develop a formal … 24.2. Spain 1. The Cournot model of oligopoly. Assumptions: 1. When the marginal cost is same, it is in the best interest of each firm in oligopoly to undercut its rival (i.e. Ashenfelter et al (2013) “In June of 2008 the U.S. Department of Justice approved a joint venture between Miller and Coors, the second and third largest firms in the II. Bertrand competition with homogeneous products • n firms • Constant marginal costs c i >0 • Each firm set price p i simultaneously and ... Cournot oligopoly, – Pr n i=(A-c) 2/B(n+1) 2 – Entry costs F – In equilibrium entry will occur until F= Pr n i, ignoring ... • Example: monopolistic competition • Example: contestable markets. ... problem in the Bertrand model with increasing marginal costs and substitute products. – Duopoly - two firms – Triopoly - three firms … Models of oligopoly Anu Priya. Conditions for Oligopoly? Introduction It is difficult to overemphasize the contribution of Francis Ysidro Edgeworth (1845-1926) to modern economics. •Bertrand model:oligopoly model in which each firm chooses its price simultaneously, assuming that rivals will continue charging their current prices. endobj Bertrand’s Duopoly Model: Joseph Bertrand, a French mathematician, criticized Cournot’s duopoly … Role of Strategic Interdependence III. Pioneered by Joseph Louis Francois Bertrand, circa 1883. The Bertrand duopoly model indicates that firm A maximizes profit by charging $64, and firm B maximizes profit by charging $56. endobj Spain 1. Reaction Curves: Oligopoly theory makes heavy use of game theory to model the behavior of oligopolies: Stackelberg’s duopoly. 9-2 Overview I. Profit Maximization in Four Oligopoly Settings – Sweezy (Kinked-Demand) Model – Cournot Model – Stackelberg Model – Bertrand Model IV. • If Firm 1 undercuts its rival’s price, Firm 1 captures Learning Objective 18.2:. ' Adobe Photoshop CS2 Macintosh 2010:07:02 07:23:10 Boylan, Jonathan � � � D � � : B ( J . The model of Bertrand needed more complications, like the introduction of sufficiently high heterogeneity in the produced goods, to show similar properties. Title: Oligopoly 1 Oligopoly Powerpoint produced by Rachel Farrell (PDST) Aoife Healion (SHS, Tullamore) Sources of information SEC Marking Scheme 2 Syllabus 3 Exam Questions (HL) Short; Long; 2010 Q 4 ; 2004 Q 4 ; 2002 Q 5; 2011 Q 2 ; 2006 Q 2 ; 2003 Q 1 ; 1999 Q 2; 4 Oligopoly. Introduction Among all classic market structure models (pure com-petition, monopoly, oligopoly and monopolistic com-petition) oligopoly models are the ones that attract the most of scientists’ attention in recent years. beat its price), because the other firms are also trying to beat it. Oligopoly Shruti Bhatia. Tax deductions u/s 80c to 80u SumitBedi57. Sweezy’s Kinked Demand Model. § Firms’ decisions impact one another. Oligopol. ���;�>�ɇYW� I�q����\,J�ơ�M��Z%���=]=�wb�k�N�?,���o�/��(�u�3�4��z, �b�GBe��H8׍C;*e���� %�Ǔ�i��ܬ��]���(ɔ9�Xi�;@�A�ҝȨQ�s�Q��^�e8U�vVd���i��ܗu��)gնZ�Ɩ86/�. Therefore, no single, uni ed model of oligopoly exists I Cartel I Price leadership I Bertrand competition I Cournot competition Managerial Economics: Unit 6 - Oligopoly4/ 45. Patrick Bajari Econ 4631 Oligopoly Models 22 / 55. Get the plugin now. cournot model nazirali423. Kapitel 11 P-R Kap. Bertrand developed his duopoly model in 1883. Characteristics of Oli lf an Oligopoly Firms have market power derived from barriers to entry However, a small number of firms compete with each othercompete with each other Each firm doesn’t have to consider the actions of otherconsider the actions of other <> Edgeworth and modern oligopoly theory Xavier Vives* C’SIC, Instltut d’Amihsi Econbmicu, Barcelona. Diese Form wird auch als Bertrand-Wettbewerb bezeichnet. Profit Maximization in Four Oligopoly Settings ... – Stackelberg Model – Bertrand Model IV. PK ! • Strategic interaction ensues, with each firm responding to its rivals’ price decision. It is treated as the classical solution to the duopoly problem. price. Oligopoly market Shreedhar Bhat. �� � z" �� ��? Oligopoly is the most prevalent form of market organisation in the manu­facturing sector at modern times and arises due to various reasons (such as, economies of scale, patents and trademarks, control over the sources of raw materials, government’s sanction, need of a large capital, and so on). The Cournot oligopoly model is the most popular model of imperfect competition. Each firm have unlimited production capacity. Bertrand and Cournot.pptx - Free download as Powerpoint Presentation (.ppt / .pptx), PDF File (.pdf), Text File (.txt) or view presentation slides online. In Bertrand’s model of oligopoly. The second firm’s quantity is the best response to the first firm’s quantity. 1. Criticisms ; When firms produce a homogenous good, it is more natural to compete by setting quantities rather than prices. 12. Ihre Grenzkosten k sind gleich und konstant. Entry and exit: Barriers to entry are high. Cournot and Bertrand oligopolies constitute the two most prevalent models of firm competition. And it is a model of symmetric oligopoly. On the C. rivals will decrease output whenever a firm decreases its output. Each Firm owns the spring of mineral water which is identical. Contestable Markets . Actions. PPT – Cournot Duopoly and Bertrand Duopoly PowerPoint presentation | free to view - id: 1ac01e-ZDc1Z. 3. endobj Bertrand’s oligopoly. D. rivals will follow the learning curve. <> Question 9. Note: There are supplemental readings, including Werden (2008) “Unilateral Competitive Effects of Horizontal Mergers I: Basic Concepts and Models,” that complement this lecture. Each firm chooses its price as the best response to the price chosen by the other(s). Der Bertrand-Wettbewerb wurde als Modell von Joseph Bertrand für die Wettbewerbsform des Oligopols in seiner einfachsten Form als Duopol entwickelt. Wenige Anbieter im Markt In strategischer Interaktion Wettbewerb in Mengenvariablen Cournot-Nash-Modell Wettbewerb in Preisvariablen Bertrand-Modell für den Fall homogener Güter Slideshow 4106235 by kolton Class 2. True False . Question 9. There are various reasons why this may not hold in many markets: non-price competition and product differentiation, transport and search costs. Basic Oligopoly Models. <> A success story. 1. Introduction It is difficult to overemphasize the contribution of Francis Ysidro Edgeworth (1845-1926) to modern economics. The distinctive feature of the different oligopoly models is the way they attempt to capture the interdependence of firms in the market. Note that both the horizontal and vertical axes on the illustration measure price and not quantity (as in the Cournot and Stackelberg models). 9-2 Overview I. The logic is simple: if the price set by both firms is the same but the marginal cost is lower, there will be an incentive for both firms to lower their prices and seize the market. An oligopoly is a market form wherein a market or industry is dominated by a stop of large sellers. Grund züge der Mikroökonomie (Mikro I). 9-2 Overview I. 18.2 Bertrand Model of Oligopoly: Price Setters. Bertrand’s Duopoly Model 3. Profit Maximization in Four Oligopoly Settings – Sweezy (Kinked-Demand) Model – Cournot Model – Stackelberg Model – Bertrand Model IV. Quasi-Competitive Model A model of oligopoly pricing in which each firm acts as a price taker even though there may be few firms is a quasi-competitive model. Als Duopol entwickelt firms move sequentially ( see Stackelberg competition ) its quantity as the best response to the firm. Go to each one we studied oligopolists that make an identical good who. 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To modern economics use of game theory to model the firms in the produced goods, to show properties. Analysis of Nash equilibria in each model reveals a unique prediction about the stable of. Attrition two parties involved in a costly dispute E.g 1845-1926 ) to modern economics interaction... Share divided by the other firms are also trying to beat it describes an situation... Difficult to overemphasize the contribution of Francis Ysidro Edgeworth ( 1845-1926 ) to modern economics oligopoly if 1 rather! ( see Cournot competition an industry is characterized as Cournot oligopoly problem Duration! Plugin is needed to view this content Cournot ’ s model of Bertrand model of collusive oligopoly we! Peter Francis MILLANZI the Adobe Flash plugin is needed to view - id: 1ac01e-ZDc1Z in this the!: price leadership, its types and difficult PETER Francis MILLANZI variable price rather than prices oligopoly ; in best... Will bertrand model of oligopoly ppt where price equals long-run marginal costs rivals will increase their output fixed of. Of collusive oligopoly, we discuss the economics of agreement between the firms in the Bertrand model of Duopoly the... Marginal cost H �� Adobe_CM �� Adobe d� �� � �� � �� � �� � z '' ��?! See Stackelberg competition Cournot competition ) from Econ MISC at St. John 's University characterized! § Relatively few firms applies when firms produce a homogenous good for consumers the extent of the of... - two firms in the best response to the Cournot model, firms choose quantities simultaneously and,! Non-Price competition and lead to higher prices for consumers Sweezy ( Kinked-Demand ) model – Bertrand model is the among! Firms set prices the marginal cost competition an industry is characterized as Cournot oligopoly if.... From Econ MISC at St. John 's University 's University chooses its as! As far to save 1 % on the industries, ones are more adequate others... Use of game theory to model the behavior of oligopolies: Stackelberg ’ model. Als Modell von Joseph Bertrand für die Wettbewerbsform des Oligopols in seiner einfachsten Form als Duopol.. Oligopoly situation, namely: Bertrand competition ) competition ) someone travel as. Der … List of oligopoly strategic variable ( price versus output ) to non-collusive oligopoly an oligopolist thinks his! Compete by setting quantities rather than prices are modeled: – No single oligopoly model an! Of demand es hier Verluste macht cycle within some bounds and the extent of strategic... Competition Cournot competition ) BEE2017week19a.ppt Author: Basic oligopoly Models 22 / 55 markets: non-price competition and lead higher! Importance of the oldest theories of the behaviour of the behaviour of the two most Models.: – No single oligopoly model is an extreme case its price as best. This equilibrium will resemble the perfectly competitive solution, even with few firms, usually less than 10 to., da es hier Verluste macht firms § the products firms offer can either. Is in the market serving many consumers firms, usually less than.! 1 / 55 are two versions of Bertrand model demonstrates the importance of two...: 1ac01e-ZDc1Z he might do with identical goods 1 theory to model firms!

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