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What are the penalties for fitting multiple similar items in EVE Online?

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Many ship fittings in EVE Online state in their description something along the lines of:

Penalty: Using more than one type of this module or similar modules that affect the same attribute on the ship will be penalized.

What is the nature of this penalty? Is it a hard-and-fast mathematical rule? Will using, for example, two of an item be less effective than using one, or is it a case of diminishing returns?


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