Abstract
Bilateral monopoly may result from many reasons which usually involve relationship specific investment. For example, one supplier’s product is specially made for one specific buyer with irreversible expenditure. This investment might be established by money, efforts, or time, and have almost no value outside the relationship. However, when market competition becomes more intense due to globalization and technical advances, the relationship might be broken. Potential entrants will attempt to enter the market because there is above-normal profit. Hence, we propose a game-theoretic model to describe this circumstance. The objective is to find optimal pricing policies maximize their profit of all the members in the market in this environment. Also, potential retailers can determine their entry strategies by this thesis.In this thesis, we analyze the problem by Stackelburg price competition model, which includes one supply chain system in the bilateral monopoly market in the beginning, and then several potential retailers will decide to enter the market because they estimate that there is enough return of investment to achieve their target. The optimal pricing policies of all the members in the supply chain system will be derived base on the marginal revenue function. Furthermore, we also introduce numerical examples of the problem and discuss some features of this thesis.