The Imps took the lead in the fifth minute, the towering figure of Ben Futcher got in a powerful header just under the bar from Bailey's corner, to grab his first goal of the campaign.
Scunthorpe were struggling to find any rhythm, although Steve MacLean tried a long range shot which flashed over the top.
At the other end Russell pulled off a one-handed save from Francis Green's header and Gary Fletcher saw his attempt strike an upright.
City strengthened their position in the 30th minute when Bailey crossed from the right and Fletcher fired the ball home in style.
Scunthorpe displayed a more positive attitude at the start of the second half but were stunned when City grabbed number three after 57 minutes.
In a quick break Richardson pushed the ball through for Green to drive in to the net.
Scunthorpe reduced the arrears in the 71st minute when substitute Paul Hayes headed home, but in the closing stages City's Paul Mayo rattled an upright and Richard Butcher missed from close range but, nevertheless, they wrapped up a convincing derby victory.
Iron lineup:
Russell, Sharp, Butler, Byrne, Stanton, Beagrie, Kell, Calvo-Garcia, Sparrow, MacLean, Torpey