To understand the nature of railroad competition we must revert to an earlier section in this chapter in which the principle of doing business under conditions of diminishing costs was noted. Since the unit cost of handling additional freight or passengers is very small, competition among railroads, when it exists at all, is likely to be very bitter. For that reason it is known as " cutthroat' competition. Not many years ago two competing lines between Chicago and New York engaged in a memorable struggle for the traffic between those two points. Ridiculously low rates were offered; so low were they in fact that both railroads did business at a loss, thereby endangering their solvency. Finally an arrangement was made by which the two lines pooled their combined business, each getting a certain share determined in advance. The outcome of this struggle is illustrative of the way in which practically all railroad wars have been settled.