Analysis of capacity-constrained sequential auctions in duopoly market environment

Sequential auctions with the Vickrey-Clarke-Glove (VCG) mechanism are proposed for two buyers to purchase multiple units of an identical item. The suppliers in a duopoly market environment are assumed to have capacity constraints of providing the required product. Three research problems are studied: the suppliers´ expected payoff functions, the suppliers´ bidding strategies in the first auction, and the buyers´ procurement costs. Both suppliers´ dominant bidding strategies are theoretically derived. Suppliers´ expected profits and buyers´ expected procurement costs are empirically analyzed.