A distributed point polarizable model (DPP2) for water, with explicit terms for charge penetration, induction, and charge transfer, is introduced. The DPP2 model accurately describes the interaction energies in small and large water clusters and also gives an average internal energy per molecule and radial distribution functions of liquid water in good agreement with experiment. A key to the success of the model is its accurate description of the individual terms in the n-body expansion of the interaction energies.

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