Object-oriented Bayesian networks for a decision support system for antitrust enforcement

Abstract

We study an economic decision problem where the actors are two firms and the Antitrust Authority whose main task is to monitor and prevent firms’ potential anti-competitive behaviour and its effect on the market. The Antitrust Authority’s decision process is modelled using a Bayesian network where both the relational structure and the parameters of the model are estimated from a data set provided by the Authority itself. A number of economic variables that influence this decision process are also included in the model. We analyse how monitoring by the Antitrust Authority affects firms’ strategies about cooperation. Firms’ strategies are modelled as a repeated prisoner’s dilemma using object-oriented Bayesian networks. We show how the integration of firms’ decision process and external market information can be modelled in this way. Various decision scenarios and strategies are illustrated.