Benchmarking Rules and Pricing in Network Oligopolies

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 benchmarkin 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 induces strategic complementarity, insulates markups within firms, and improves welfare. The welfare advantage persists even when firms endogenously choose network size. The resulting benchmark is self-anchoring and operationally implementable using observable prices. 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.