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.