tion we have made,--that competition between carriers by
water has done its full work,--the charge for carrying anything by
water from A to B must be sufficient to cover a _pro rata_ part of the
total costs. That may be sufficient to cover the merely variable costs
entailed on the railroad, or it may not. If it does not, the railroad
will not take any portion of the business except what it may take by
reason of the greater speed with which it can transport the goods. If,
however, the total costs of carrying by water exceed by a tolerable
margin the merely variable costs of carrying by land, the railroad
will be able to take the traffic. If this traffic goes to the water
route, the charge made by the railroad from C to B is adjusted by a
simple rule. This railroad can get the natural difference between the
cost of the goods at C and the cost of similar ones made at A and
carried by water to B. If the railroad gets the traffic between A and
B, and the water route is abandoned, the case becomes the same as that
which we have already considered,--the transporting is done at a rate
which prevents one of the lines from covering its merely variable
costs and secures all the traffic for the other line. The carrying
from A to B goes by land or by water according as the variable costs,
in the one case, or the _pro rata_ share of total costs, in the other,
are the less; and nothing can be carried from C to B unless it can be
delivered at B at a price as low as that of goods made at A and
transported at the rate just described. If the costs of making at A
and C are equal and there are the three carriers seeking traffic, as
assumed, the result naturally is to give all the business to the one
who will bid the lowest for it. Either railroad will bid as low as the
variable costs which the traffic occasions; while the owners of ships
will bid no lower than the rate which covers costs of both kinds.[2]

[2] If carriers by water are in that intermediate state in
which their capacity is only partially used, they also may
offer to take some traffic for an amount which only covers
variable costs; but this condition does not naturally become
in their case semipermanent, as it does in the case of
railroads.

[Illustration:
RAILROAD _____
__________________/ \
/ \_
__/ \___
A __ __ B
\