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Whatever works best for your story. If you can make it work in a real setting and you know or can research the setting well enough to make it work, do that. If your story requires something which...
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#4: Attribution notice removed
Source: https://writers.stackexchange.com/a/6458 License name: CC BY-SA 3.0 License URL: https://creativecommons.org/licenses/by-sa/3.0/
#3: Attribution notice added
Source: https://writers.stackexchange.com/a/6458 License name: CC BY-SA 3.0 License URL: https://creativecommons.org/licenses/by-sa/3.0/
#2: Initial revision
Whatever works best for your story. If you can make it work in a real setting and you know or can research the setting well enough to make it work, do that. If your story requires something which doesn't exist, is or is not against a particular law, needs a river to be here rather than there, etc. then invent a place.