Benchmarking Rules and Pricing in Network Oligopolies

Jolian McHardy

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

Abstract: In network industries with complementary or sequential consumption, decentralised pricing can generate inefficient cross-firm markups on bundled consumption. Motivated by regulatory provisions for coordinated pricing that have received little formal analysis, we study benchmarking rules that tie cross-firm prices to standalone or bundled products. Benchmark design fundamentally shapes equilibrium outcomes by altering strategic interaction and markup propagation across firms. Coordination is not inherently welfare-improving: discount-based benchmarks actually generate equilibrium surcharges. By contrast, a bundled no-discount rule (NDB) induces strategic complementarity, insulates markups within firms, and improves welfare. However, private and social incentives can diverge, so welfare-improving coordination may not arise endogenously. The analysis extends beyond small networks to general n-firm settings. A transport calibration indicates substantial consumer-surplus gains (around 20%), alongside external benefits comparable in magnitude to existing operating subsidies.

Keywords: network pricing; benchmarking; complementary goods; network industries; competition policy. (search for similar items in EconPapers)
JEL-codes: D43 D62 L13 L41 L51 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2026-05
New Economics Papers: this item is included in nep-com, nep-des, nep-ind and nep-reg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.sheffield.ac.uk/economics/research/serps Second version, May 2026 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2026003

Access Statistics for this paper

More papers in Working Papers from The University of Sheffield, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mike Crabtree ( this e-mail address is bad, please contact ).