The Early Business History of Four Massachusetts Railroads — IV

At first, the early Massachusetts railroads did not fix the passenger and freight rates on the basis of any theoretical rate-making formula. Instead, they met the competition of wagons and stages and, where necessary and possible, the steamboats. The railroad directors wanted to assure the stockholders reasonable and regular dividends, but I have seen no evidence that the directors expected to maximize the profits, even within the limits of the charters. Only an occasional director was willing to risk the possibility of greater profits by experimenting with extremely low rates on the theory that really cheap, improved transportation sufficiently increases the demand for transportation to justify the lower fares.