If the competition is between railroads alone, the conditions of their service being approximately equal as to cost, agreements are made to abide by established tariffs, and such tariffs may be but little lower than to non-competitive points. There is, then, but little discrimination. but sooner or later the struggle for the traffic leads one road to cut the tariff rates; the other retaliates by a greater cut, and this often ends in a reckless war of rates. After the excitement of such a contest has somewhat passed away, the injuries inflicted become more felt, till at length reason leads to a restoration of the tariffs. During such a contest there is an unreasonable discrimination, as the rates are frequently loss than the cost of the service. The only solution of the problem which has yet been found is to remove the incentive to cut the rates by fairly dividing the traffic between the competing lines. The common method of accomplishing this is to pool the receipts and to redistribute them on percentages based upon experience and decided by an arbitrator. This is the only instance, so far as I am informed, in which the natural principles regulating the rates of transportation lead to an unjust discrimination; and in this case the loss to the railroads, by carrying the traffic for less than cost, is perhaps greater than the injury to the community by the disturbance of values and oversupply which accompanies such contests.
So far, then, as the competition at a given place between railroads alone is concerned, the discrimination is regulated to a great extent by the harmonious working of the roads themselves. In competition with water-routes, however, on account of the inequality of their circumstances as to the cost of the service and the ease of adding new competitive boats, a discrimination must always exist. It is beyond the power of the railroad or any person or other body to prevent it, except by the heroic remedy of interdicting the traffic by rail. The water-route is free to all, its highway is furnished by nature, and the carriage is the only item of cost which must be borne by the traffic. The railroad company, on the other hand, has two existences: it is the owner of a public highway, and is a common carrier. The rate of transportation is thus composed of the toll for the use of the highway, and the charge for the service of carriage. This is a distinction which is not made in the popular mind, though it is always recognized by the law, and is important to bear in mind in the present instance; for it affords a justification of the discrimination made in favor of places having water competition, besides that contained in the necessity of the discrimination to secure the traffic.
We may take first the simple case of those places having no unusual amount of traffic, and located anywhere on the line of road, either local stations or through points; the only peculiarity about them being that they are on a competitive water-route. In those other cases where the favored places are great markets as well as competitive points, the problem becomes more complicated and will
