A new method is presented for determining event-by-event fluctuations of elliptic flow ($v_2$) using 1st-order event planes. By studying the event-by-event distributions of $v_2$ observables and 1st-order event-plane observables, average flow $\avg{v_2}$ and event-by-event fluctuations with respect to that average can be separately determined, making appropriate allowance for the effects of finite multiplicity. The relation of flow fluctuations to eccentricity fluctuations in the initial-state participant region, as well as detector acceptance effects, are discussed. The method has been tested with Monte Carlo simulations.
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