So many factors enter into such a question that no exact solution is possible. The chief factor is the proportion of competitive business.
On business where there is direct competition the road with less facilities must either give up the competition for such business or offer some compensating advantage which will probably consume nearly all, if not quite all, of the profits on such business. On other business which is non-competitive the disadvantage will not be so great, although even here it must not be ignored. The late A. M. Wellington attempted to answer this question by the statement that the location of a station one mile from the heart of the town will affect the business from that town anywhere from 10 to 40%, depending on the circumstances, and that 25% might be considered an average figure. For each succeeding mile he deducted 25% of the remainder. Of course such an estimate is at its best a very loose approximation.
A very common mistake among railroad promoters is to assume that a railroad passing through any section of country will be able to collect "all the traffic there is," disregarding for the present any competition from another road. This idea is probably responsible for many of the blunders which have caused a road to be located in a way that hampered traffic, when the only object gained was a very insignificant economy in the first cost of the road. The student should not forget that railroad traffic varies in its character from the absolutely necessary traffic, for which any reasonable or even unreasonable sum would be paid, to the extreme of unnecessary traffic, such as traveling for pleasure, which is absolutely dependent upon the facilities offered. Even freight business depends on the total cost of transporting goods from their location in a factory or mine to the very door or warehouse of the consumer. The laws of competition require that the manufacturer must be able to manufacture his goods and deliver them to the door of the consumer in a distant city as cheaply as his rival can deliver goods of the same quality at the same destination. Anything which facili tates such transportation, not only affects the factory or mine, but it may make all the difference between profit and loss on the whole transaction. Therefore the prosperity, not only of the railroad, but also of the mining and manufacturing interests, depends on the promotion of railroad facilities. In a town where there is no competition the railroad may have a monopoly so far as any other railroad is concerned, but, unless facilities are created to handle goods with economy and to transport passengers conveniently, the amount of traffic developed will be very greatly reduced. The strictly necessary traffic which a railroad might claim as a monopoly is so very small that very few railroads could pay their operating expenses from it. The dividends of a road are declared out of the last small percentage of the revenue, and such revenue comes from the unnecessary traffic, which must be coaxed and encouraged, and which is so very easily affected by the lack of facilities and conveniences.
Perhaps the best general statement which may be made regarding the question of locating a station near the business center of the town is that it depends on the limit of capital which may properly be put into the enterprise, provided the project as a whole is not financially wrecked by the expenditure. There is hardly a limit of expenditure which would not prove a paying investment in course of time in order to locate a road within a block of the business center of a town. It should never be considered as a project which may be deferred, since the price of land invariably increases and usually multiplies many times after the road has been constructed, so that a future construction into the heart of a town or city becomes almost prohibitive unless at enormous expense.