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When I have seen Market Size drop from 2 to 1, it will sometimes go up to 2. Just as often, however, it drops back to 1 from there. I am not sure I have ever seen a Market Size of 1 turn into anything I would consider competitive (I am talking 60+ seasons of play). If you are sticking it out, you need to either have some sort of shared revenue model... or you need to be happy with the handicap you are giving yourself against the AI (certainly a place for this as well).
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