A Dunkin' Donuts Store Exhibits Penny Sanity

One Dunkin’ Donuts store is taking a stand against the penny. A sign at the store reads “We will be rounding your change to the closest nickel. For example, if your change is $2.03, we will give you $2.05. If your change is $2.22, you will receive $2.20. For any customer who still would like their pennies, please just ask the cashier and we would be happy to accommodate you.” The change is designed to speed up service. Here’s hoping the initiative goes viral. (HT: David McCall and Meir Lindenbaum) [%comments]

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COMMENTS: 61


  1. Gordon says:

    This initiative has been running in many South African supermarkets for a number of years now. But the difference is that they ALWAYS round the total down – so the customer always benefits.

    So a purchase totalling 5.44 will be billed at 5.40.

    This initiative is used regardless of the payment method used, cash, credit card etc.

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  2. Iljitsch van Beijnum says:

    This has been common practice in the Netherlands for a long time. Before the euro, cents were no longer issued for many years. With the euro, the cent came back but stores returned to their old ways after a couple of years. I don’t understand this because cent coins are tiny and don’t get in the way, it’s those huge two euro coins that are a drag.

    I’m not paying 2.25 if the bill says 2.23. If stores don’t want to deal with these small coins, why are they still pricing their wares as 0.99 rather and 1.00? (In Europe the tax is included in the listed prices so there are no issues with the tax making for awkward amounts.)

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  3. Sean says:

    What I’d like to know is why can’t Dunkin Donuts (or any other retailer) just fiddle with the before-tax prices on their menu to ensure that every after tax, every transaction would wind up being divisible by 5 cents? Or 10 cents? Or 25? Does anyone do this already?

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  4. Oscar says:

    This is great. I hope others follow suit, I don’t mind the 2 – 3 pennies either extra or less that I get on cash purchases… better than carrying around pennies in your pocket.

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  5. Daniel McLeod says:

    Sean,

    Yes, AMC does this. Go into any of their theaters and look at the prices of all the items on their menus.

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  6. 164 says:

    Just pay electronically, othewise I’ll take the full change unless the rounding works to my benefit.

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  7. JimBob says:

    @3 Perhaps it’s because not only is it an issue to give out pennies but it takes a long time to get them too. Ran into that issue today at a store where a little old lady gave exact change. Took her 3-4 mins to find all the right coins, of which at least 10-15 cents of that was in pennies. It was maddening.

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  8. Andrew says:

    In Australia, where 1 and 2 cent pieces were done away with some years back, the total is rounded down (much like the S.A. and Netherlands examples). The tax is also pre-calculated so you know what the total is (e.g. if an item is $1.12, this will be charged at $1.10 which automatically includes the 10% tax).

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  9. Another David says:

    This makes perfect sense. We already do this on the sub-penny level. For example, a tax that results in something costing $2.057 becomes $2.06. Why not do it on the super-penny level?

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  10. Justin James says:

    @Iljitsch (#2) -

    They price things that way because the .99 looks much cheaper to the customer than the .00. There are studies showing that it can affect sales numbers.

    J.Ja

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  11. Robert says:

    @Sean:

    An independent coffee shop I frequented almost 15 years ago did that; all prices were listed “including all applicable taxes”, and were (I believe) multiples of a quarter.

    The problem comes up where chains (and, especially, national chains) come up against tax rates that can vary within a zip code. It’s not terribly common, but sales tax can differ at opposite ends of town!

    Taxes definitely differ from state to state, so national chains can’t really run national ad campaigns with “tax included” prices without adversely affecting either their competitiveness (in low-tax areas) or profitability (in high-tax areas). Nor can they tweak prices so that the total at the register will always be a multiple of 5c. It really does only work at the individual-store level.

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  12. Greg says:

    There were a couple of burger stands in Provo, Utah that adjusted their prices to come out as full quarters after-tax.

    The quickest way to kill the penny would be to abandon $x.99 items.

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  13. bg says:

    In NZ, we first eliminated the penny, rounding to the nearest 5, then we got rid of the nickel, rounding to the nearest 10. Much faster and less change to carry around.

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  14. Joe says:

    I certainly agree with Sean (#3). Set the prices such that the after-tax prices are a multiple of 0.05. The store in my high-rise office building charges $1.47 for a bottle of Coke, which comes out to $1.65 after Chicago taxes (yay, highest sales tax in the nation…)

    Interestingly enough, when the soda tax was implemented (another percent or so for soda), the price remained the same, but they actually printed $1.47 on the bottle – before that they were simply running European-style, tax included in listed price. Nice to see the retailer eat the two cents per bottle – keeps me coming back instead of picking it up on my way to work at Walgreens (who did raise the price by 0.02 by passing the tax on to us).

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  15. Paul says:

    @Sean – No this isn’t possible because of rounding. You could make it so that each item rounds nicely, but not all combinations. For example, if you had 10% tax, tax on a 9 cent item would be 1 cent, which would be good. But tax on 6 of them (54 cents) would be 5 cents, giving a total of 59 cents.

    @Iljitsch – If you are so concerned about getting every cent back from your change, why doesn’t it bother you that under your plan everything would be a cent more? Under the current pricing, if you buy 5+ items, you pay at least 5 cents less.

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  16. Kevin says:

    @Sean – because most chains have corporate set the prices, and they advertise those prices in the window. And since every city/county/state has different tax rates, pre-adjusting for every store would be a nightmare.

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  17. msollot says:

    “For any customer who still would like their pennies, please just ask the cashier and we would be happy to accommodate you.”

    First, in principle, I like the idea of rounding to the nearest nickle.

    Second the Dunkin’ Donuts’ store revenue will increase. I think there are a lot of people who don’t like dealing with pennies nowadays.

    The question is, if the ’rounding’ is not in the customer’s favor, how many would ask for the 1 or 2 pennies? I think this would be an interesting behavioral economic experiment. My guess is that if the person was alone and/or no one else in the store, more people would ask for the pennies. If the person was with other people, fewer would ask.

    Maybe you should study this and include in ‘Superduperfreakeonomics’?

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  18. Ian Kemmish says:

    Wouldn’t a more “nudgy” solution be a sign that says, “unless otherwise instructed, we donate every penny in your change to charity”?

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  19. Ray says:

    @Paul, you CAN do it if you set the prices to fractions of pennies. Then you can avoid the rounding issue. Now the only problem is floating point arithmetic.

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  20. Paul says:

    Did no one notice that the store isn’t rounding the prices up, its rounding your change up. This is always to the benefit of the customer.

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  21. I wonder says:

    If the goal were to maximize the financial transaction (and not coin management), then two-fifths of customers would be asking for pennies. This would seriously slow down service, as you add another transaction: “That’s $2.20 in change,” “I’d like the pennies”, “Here’s your pennies”.

    A quicker solution might be a sign next to a small dish of pennies, saying “We round down, but if you want the one or two pennies, you can take them yourself.”

    The costs to the customer in the current system are high: To request the pennies, you have to put your pride in your pocket and communicate to another human that you really do care enough about such a tiny amount of purchasing power as to make them depart from the usual script. I’ll bet that some customers are irritated (especially if they order the same thing each day, and it rounds unfavorably), but are unwilling to pay the social costs involved in “begging” for what is theirs.

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  22. I wonder says:

    I wonder whether penny acceptance varies by gender. The common hassle-oriented complaint is about “pennies in my pocket” — and very few women carry any money at all in their pockets (assuming their clothes have any pockets in the first place; see also gender discrimination, paternalistic fashion design that deems women too decorative or too dependent to need a functional place for keys or money, etc.).

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  23. Eric M. Jones says:

    In Oregon, I once got a fill-up of gas. The pump said $20.80. The attendant said, “$20 is fine”.

    So they rounded down to the nearest dollar. Cool. Works for me.

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  24. Whataburger Fan says:

    I know the Whataburger restaurant nearest to my parents house does what was suggested above (fiddling with the before tax price to make the taxed price even dollar amounts). Since I often pay with my debit card, sometimes it’s frustrating to know the hamburger is costing me 10 cents more, but when I pay cash, the convenience is nice, I’ll admit.

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  25. Steve says:

    WHen I was stationed in Germany in the late nineties, the Post Exchange stores always rounded the change. It was great!

    I was told that the PX implimented the no penny policy because the cost of shipping pennies to Europe was too expensive. (Apparently, stores give out more pennies then they receive because people put pennies into jars).

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  26. David says:

    Our company in the U.S. prices everything not only in dollars, but generally because the products are not low end, often rounded to the nearest $25. While there are studies about 99 cents doing better than 1 dollar, for example, you have to be selling to very low end clients for it to make any real difference.

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  27. Mack says:

    It’s been years since I bothered with pennies. When I use cash instead of debit — not often these days — if there are cents in the change I leave them in the penny bowl or just stack them on the counter for the next guy. Just ignore them and they’ll go away.

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  28. Nick says:

    The states should just have the merchants charge their advertised price, then just collect a percentage of the total sales revenue. That would solve any rounding issues.

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  29. Eric says:

    Has nobody here seen superman III????

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  30. MatthewV says:

    Why have prices at $0.99 instead of $1.00? Customer phycology. People feel they are getting a better price at $0.99. Rounding the price reduces the amount people buy.

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  31. Steve says:

    New Zealand recently made 10c its smallest coin, and nobody cared – we were all glad not to have to bother carrying around a coins for such trivial amounts. 1 – 5 cents gets rounded down. 6 – 9 cents gets rounded up. As 1 NZ cent = roughly 0.8 US cents or 0.5 eurocents, it would seem reasonable to make 5 US cents or 5 eurocents the smallest coin.

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  32. Paula says:

    This is great, but if I could get my Dunkin Donuts to quit auto printing receipts, they could possibly round to the dime with the amount of money saved from receipt paper.

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  33. Bek says:

    Whatever happened to “a penny saved is a penny earned.”
    I will gladly take the extra change if rounded in my favor, but I also would have no reservations in asking for my extra two cents if rounded in the stores favor. The people who wouldn’t ask for their change are probably the same people who funded my last trip to Hawaii — paid for by a 5 gallon jug full of loose change that I picked up from people that didn’t want it cluttering up their night stands or pockets!

    @msollot – I would ask for my change regardless of the number of people present.

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  34. Jerry says:

    I wouldn’t be so thrilled to bid farewell to the penny. This is inflationary. It won’t take long until the rounding progresses to the dime. After all, it’s easier to round by decimals than nickels. And, then it will be the dollar.

    Welcome to the Weimar Republic.

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  35. Roo says:

    Whats next? Oh ya, will just round up to the nearest dime. Them dam nickels just weigh to much. Wake up, they are debasing and inflating our currency again. If you really think a penny is worthless, look at what a pre 1982 penny is actually worth in metal and you’ll get to see what their up too. Inflation is the most cruel and sinister tax a government can impose on its people.

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  36. twicker says:

    @Paul/# 20: Reread the post. They round to the *nearest* nickel, not up. Hence the reason that $2.22 in change becomes $2.20 in change (meaning the store keeps the other $0.02).

    As to the pricing (for those that commented):
    1) If the store is doing this, they’ve almost certainly found that the majority of the time, the rounding goes in their favor (and enough in their favor to offset any losses). They’re a business, not a charity.
    2) It’s absolutely possible to price things with tax included (possibly depending on the municipality). In most places, it should be possible to back-calculate the taxes a business owes on $X amount of revenue, no matter what the cost is to the customer (it’s algebra: Revenue = Price + Tax; Tax = Price*Rate; therefore, Revenue = Price + (Price*Rate); knowing Revenue and Rate, you have one equation & one variable — you can calculate “Price.” Tax man is happy, b/c you paid full taxes on all the after-tax revenue.).
    3) As alluded to above, the reason stores charge $X.99 (or, more sneakily, X.99 with no dollar sign — people pay more) is because it *feels* different, and better, than $(X+1). Thus, stores sell more. Thus, stores have little incentive to stop.
    4) When tax is *not* included in the published price, people see the published price and think of that price as *the* price. When it *is* included, people pay attention to the extra cost of the tax (which they ignored before). Therefore, the store can garner more good will, and more sales, by not including the price of taxes. Again: including taxes in the price is a trivial algebraic exercise. However, it results in a decidedly non-trivial loss of sales for the store.

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  37. Mike says:

    It doesn’t matter what price the individual goods are priced at as long as the CASH exchange for the TOTAL TRANSACTION is rounded.

    In Australia only cash totals are rounded (up for totals ending in 8 or 9, down for 6 or 7). If you pay by debit/credit card then the exact amount is used. The 5c piece may soon follow the 1 and 2c into numismatic oblivion.

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  38. The Sandwich Man says:

    I owned and operated 3 sandwich shops near Atlanta in the 1970′s. I always set my menu prices to round to the nearest nickel after sales tax was added. My cashiers and customers loved the smoother process. And I did not have to waste time with counting and depositing the worthless coins.
    I guess I was way ahead of my time!!!

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  39. DQKennard says:

    On the other hand, doesn’t WalMart use their odd penny pricing as some visual indicator of markdown? WalMart prices are things like $x.y7. If they’ve marked it down (“rolled it back”), it becomes something ending in 6. Another round of markdown gets another specific pattern. That’s why you end up seeing clearance items there with prices like $2.43. Managers can look around the store or at sales and pricing sheets and instantly get a sense of slow-moving stock or consumer response to a specific markdown. There’s a case where pennies can provide actual information.

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  40. notmelbrooks says:

    They should round to the nearest quarter .

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  41. Leland Witter says:

    I’ve thought that regular coffee should always be “medium” and always cost $2.00 including tax. Size difference is barely an issue and I hate having to pay $2.08 or similar.

    At my local place, medium coffee is $1.90, so I always give $2 and don’t even wait for change.

    I’ve thought about trying to negotiate down to an even $2 at places where it’s more, but haven’t had the gumption.

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  42. Alberto says:

    I cashier for retail and I always ask the customer for pennies to make their change more even, I loathe having pennies and my assumption is that everyone else does too. I worked for two theaters that didn’t have the ability to display the change amount, as a result, tax was included in our prices. Everything ended with a 5 or a 0, this also made it a very simple to count change back and quicker to catch any errors.

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  43. rick says:

    sucks if you collect coins. pennies are often the most fun

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  44. Amanda says:

    This is now the practice in Australia for many years – we no longer produce 1 or 2 cent coins and all change is either rounded up or down to the nearest 5 cents. We have survived as a nation – as I am sure you all will if the US adopts it.
    BTW – we also no longer produce 1 and 2 dollar bills – our lowest denomination is the $5.

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  45. Ken says:

    If you’re an hourly worker, or your work is billed out by the hour, asking for the pennies might actually be an unwise choice for you depending on how long the extra transaction takes and what your hourly rate is.

    The most you could get out of doing so is 4 cents, and the transaction (you asking for the pennies and then the cashier counting them out and handing to you) would probably take about 5 seconds, for the sake of argument.

    If your hourly rate is greater than $28.80/hr, it makes sense NOT to take the 4 cents, because you could have done some work in those extra 5 seconds.

    Where H = hourly rate, T = time in seconds it takes for transaction to happen, and X = money gained by taking the pennies, if

    (H*T) / 3600 > X

    then you should not ask for the pennies.

    Those of you who are professionals with high hourly rates might want to pass up the extra change.

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  46. Damon says:

    “This is great, but if I could get my Dunkin Donuts to quit auto printing receipts, they could possibly round to the dime with the amount of money saved from receipt paper.”

    I’m pretty sure they want you to get a receipt every time so that the cashiers don’t just make change for you out of their drawer and then pocket the money themselves.

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  47. Paul says:

    Drop a decimal place. $1.50 becomes $1.5. Stop making pennies and nickels.

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  48. Randolph Miller says:

    Probably everyone would benefit if they just stopped making pennies.

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  49. wooden nickel says:

    I’ll take the pennies. The metal in them is worth more than one cent.

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  50. jborden says:

    You donot have to be an economist to figure out how dumb this discussion is. Most of you have allready decided that you will take another 10% inflation by rolling over, beware the nickle, dime, quarter. Welcome to Zimbabway where we will all be millionares over night.

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  51. Concerned Citizen says:

    This is just another instance of Gresham’s Law, where bad money drives good money out of circulation. In this case, it’s completely virtual money driving out pennies, nickels and dimes.

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  52. Wiggly Bob says:

    The cash register was invented to stop employee theft. A bell would ring when the cash drawer opened indicating that a sale had been made. Stores set prices at odd amounts so change would always have to be made. That was over 100 years ago. They still might worry that sales that come out to even dollars might result in the cash going into the pocket.

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  53. subshop owner says:

    Fortunately for us in Montana, there is no sales tax – so being with a franchise that allows some leeway in pricing, I made everything on the menu quarters without having to try to calculate for tax. Don’t have to mess with getting smaller change at the bank, speeds up customer service, it’s honest and straight-forward pricing (I don’t care what the studies say, I know people like me detest the subtle deception of .99), saves time keeping the change drawer stocked (or coin dispenser which we previously had – unnecessary now). Starting to see a lot of other restaurants going to this model too for so many reasons.

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  54. Mike says:

    I know some of you can’t conceive of things working outside the US ( or of things happening *first* outside the US), but can any of you supporters of the inflationary theory point to a single country where abandoning pennies has caused this?

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  55. Phelan10 says:

    It is incredibly sad how few people truly understand they are robbing you blind. Those of you who think this is a good idea do so because you do not value the penny. Image suggesting this in 1913 when a penny had purchasing power? Wake up. The FED and the gov’t are robbing us blind thru inflation.

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  56. scott says:

    “can any of you supporters of the inflationary theory point to a single country where abandoning pennies has caused this?”

    What you don’t seem to understand is eliminating pennies in and of itself does not cause inflation. The elimination of pennies symptomatic of a larger phenomenon that occurs when inflation is present. The question is why have we gotten to a point where pennies are near worthless?

    Next up for elimination are nickles as they become worthless. Then the dime, then quarter, then dollar… you see where this is headed? It’s quite fascinating, albeit also unsettling, to watch this occur. Possibly more fascinating when you realize most people have no clue the ramifications of these types of things – the thought process doesn’t go beyond “well at least my pockets will be lighter”. Go critical thinking!

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  57. Mike says:

    Yeah, “go critical thinking”, and figuring out cause and effect.

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  58. Georgia says:

    As someone who works in a shop, I would like to point out that it really only takes 1 extra second, tops, to move your hand to the next segment of the till and pick up a penny. Also, just a thought, may seem daft, but as people generally only donate to the charity collection boxes by the till if their change is 1-4 of those annoying little pennies, perhaps charities could lose revenue from a lack of pennies?

    Last bit, to echo previous comments: money is still money/every little counts etc etc, it’s still cash, am I really that tight, or does it just seem a bit blase to dismiss your pennies so quickly?

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  59. Neel Kumar says:

    It would be far far simpler to just charge in round numbers! Why can’t the prices be set in such a way that after taxes they come to round numbers?

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  60. Eric R says:

    “Next up for elimination are nickles as they become worthless. Then the dime, then quarter, then dollar…”

    The US stopped producing half cents in 1857. If they stopped making pennies now it means that it took 165 years of inflation to drop a coin with 2x the value of the last discontinued coin. With the nickel being a 5x jump and a dime 2x from there and a quarter 2.5x from there, we might be talking hundreds of years before those other coins go the way of the dodo

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