The Wal-Mart effect has a dramatic impact on upstream manufacturers in a supply chain. This study applies a game-theoretic approach to analyze the effects of the leading retailer in a supply chain. We propose three models relating to the interactions between upstream duopolistic manufacturers and a downstream retailer: The first model represents that both manufacturers react simultaneously and independently to the retailer’s price decision. The second model describes both manufacturers reacting to the retailer’s decision in a leader-follower price competitive condition. The third model is a traditional upstream-dominating situation, which will be employed to contrast with the first two downstream-dominating models. By changing the degree of substitutability of the two products made by these two manufacturers, there are some findings: (i) As a downstream leader in the supply chain, the retailer profit is more than the sum of the two duopolistic manufacturers. (ii) If the duopolistic manufacturers also play the leader-follower game, the leader manufacturer’s profit is greater than the follower manufacturer’s profit. (iii) When comparing to the manufacturer-dominating model, the retailer-dominating models have the lower retail price and an increase in sale quantities. (iv) Compared to the manufacturer-dominating model, the retailer-dominating models’ producer surplus, consumer surplus, and social welfare are improved. Keywords: Supply chain, Leading retailer, Wal-Mart effect, Game theory