We present a microscopic model for collisions of one-dimensional granular rods which includes elastic vibrations of the particles. Transla-tional energy can be transferred to the vibrational modes but the reverse process is also possible. This results in an effective stochastic coefficient of restitution. Many particle simulations of a system of these rods show complex cluster dynamics but no inelastic collapse, even if the model is extended to include net energy loss. The model is also extended to two dimensions.
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