Race to the top in traffic calming

We study the competition of two suburbs facing transit traffic flows. The suburbs are substitutes for transit traffic. In the absence of toll measures, the symmetric Nash equilibrium with two local governments leads to a race to the top in traffic calming measures that increases the cost of travel. The Nash equilibrium is compared to two types of centralized decisions: the symmetric solution and the asymmetric solution. The asymmetric solution that concentrates all transit traffic in one suburb is better but can only be realized if the authority over the local roads is transferred to the central authority.