competition goes on to the bitter end. As a rule
this is an unrealized alternative. The mere prospect of the calamity
connected with it is bad enough to put an end to the independent
action of the different railroads. With the facilities for combination
which now exist a far smaller inducement suffices to bring this about.

[Illustration:
RAILROAD
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A ___________________________________ B
RAILROAD
]

_The Case of Railroads whose Entire Routes are Parallel._--We have to
consider only one more typical case in order to have before us a
sufficient number to establish the general principles which govern the
charges for the carrying of freight by railroads. Variations
innumerable might be stated; and, indeed, the experience of the
railroad system of this country affords the variations and reveals the
results which follow from the conditions they create. The railroads
may be strictly parallel lines, pursuing the same route and competing
for local traffic as well as for through traffic. If the case we
lately examined insures consolidation,--and indeed all of the cases we
have stated impel the companies powerfully toward it,--this last case
makes assurance doubly sure. Strictly parallel railroads competing for
traffic over their entire routes and neither uniting nor showing any
of the approaches to union would be an impossibility. Persistent
competition would then mean reducing all charges to the level fixed by
variable costs, which would leave no revenue whatever to cover fixed
costs, and would send the companies into a bankruptcy from which even
reorganizations could not relieve them, since they could not
annihilate all the fixed costs.

_A Case of Arrested Development._--It is clear that, in the entire
policy of railroads, the fact that their capacity has never been fully
used plays a highly important part. It makes the distinction between
fixed costs and variable ones a leading element in the adjustment of
charges. With the capacity of railroads completely used, as is that of
a ship which carries a full cargo at every voyage, the distinction
would lose most of its importance. More business would then require an
addition to every part of the plant and would thus entail new fixed
costs which would have to be charged against the new business. As the
traffic of any railroad grows toward its maximum, the cost which each
separate addition to it entails