lost customers. Such ruinous competition, if long persisted in, must
necessarily cripple, if it does not bankrupt, a majority of those who
engage in it. It is fortunately as rare in industrial and commercial
circles as it is common among public carriers.

This difference can easily be accounted for. Where there are a large
number of competitors the prices of the commodities supplied by them are
leveled down until they reach a point where they will afford only a
reasonable margin of profit, and beyond which they will cease to be
profitable, and will therefore cease to be supplied until the
equilibrium is again established. Where, however, the number of
competitors is small, the price of the commodities supplied by them
will, by agreement, for a time at least, be maintained at a point where
it affords considerable more than a reasonable profit. Here the large
gain presents to the various competitors such a temptation to outstrip
their rivals and increase their business at the expense of good faith,
that but few, if any, of them will, in the long run, resist it. The
tendency to underbid rivals will always be strong where profits are
large, and it may safely be asserted that efforts to maintain, through
combinations, excessive rates are the most fruitful source of ruinous
competition.

In time railroad managers became convinced that, unless it was possible
to radically reform railroad ethics, rate agreements could never be
relied upon for the maintenance of excessive rates at competing points.
The combined roads found it an easy matter to agree upon excessive
rates, but were powerless to enforce them. Experience convinced their
managers that to make their tariffs effective it was necessary to
deprive individual roads of the power or the inducement to cut below the
agreed rates. Their ingenuity in time developed a system which promised
to remove from individual roads every temptation to take business at
less than schedule prices. This device consists in a division of
railroad business and is commonly called a pool. There are various ways
in which such a division is made. Either the traffic is divided among
the various companies meeting at a common point, or each road is allowed
to carry all freights that it may receive, and then the earnings of the
different roads are divided, each road being paid the actual cost of
such service as it has performed. There is still a third pooling
arrangement, consisting in a division of te