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This paper systematically derives a quantitative model how to set the parameters of the RED queue management algorithm as a function of the scenario parameters bottleneck bandwidth, round-trip-time, and number of TCP flows. It is shown that proper setting of RED parameters is a necessary condition for stability, i.e. to ensure convergence of the queue size to a desired equilibrium state and to limit oscillation around this equilibrium. The model provides the correct parameter settings, as illustrated by simulations and measurements with FTP and Web-like TCP flows in scenarios with homogeneous and heterogeneous round trip times.