Coordinated Pricing Rules in Network Oligopolies

Jolian McHardy ()
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Jolian McHardy: School of Economics, University of Sheffield, Sheffield S10 2TU, UK

No 2026003, Working Papers from The University of Sheffield, Department of Economics

Abstract: Network oligopolies with sequential or multi-part consumption face double marginalisation across complementary components, motivating constraints on inter-firm pricing. Building on regulatory provisions permitting coordinated pricing for composite or multi-firm products, we study pricing rules that benchmark cross-firm prices against firms’ standalone or bundled prices. Coordination is not inherently welfare improving: discount-based benchmarks can generate equilibrium surcharges. By contrast, a no-discount rule, NDB, ties cross-firm pricing to own-firm bundles, internalising complementarities without propagating markups and raising welfare across a wide range of market sizes and demand parameterisations. However, private and social incentives need not align, so welfare-improving coordination need not arise endogenously. Whilst these results apply broadly to coordinated pricing in network industries, a calibration to the UK bus market illustrates quantitative relevance. NDB delivers substantial consumer-surplus gains (around 20%) and increases ridership, generating external benefits comparable in magnitude to current operating subsidies, up to £0.5 billion p.a.

Keywords: network pricing; coordination regimes; complementary components; pricing benchmarks; competition policy; network industries. (search for similar items in EconPapers)
JEL-codes: D43 D62 L13 L51 R48 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2026-04
New Economics Papers: this item is included in nep-com and nep-des
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