Fun & Games: An Analysis of Cooperative Practices in the American Toy Industry

In the early 1990s, Toys R Us—the nation’s largest toy retailer—faced increasing competition from warehouse clubs.  Using an innovative business model, these clubs undercut Toys R Us’ prices and began eroding its market share.  Toys R Us responded by pressuring toy manufacturers not to supply the clubs or to supply the clubs on disadvantageous terms.

This article explores the cooperation Toys R Us facilitated among toy manufacturers.  Using game theory, models are created to examine: (1) Toys R Us’ decision to organize the club boycott; and (2) the manufacturers’ decision to cooperate.  The models expedite analysis of the strategy and tactics Toys R Us used to promote cooperation.  The paper concludes cooperation occurred because Toys R Us deftly managed information exchange, incentive management, and enforcement.

Special Report: Private Equity Fees

The Consus Group has analyzed nearly 100 private equity transactions brokered by leveraged buyout funds like Kohlberg Kravis & Roberts and Hicks, Muse, Tate & Furst.  Spanning industries from consumer products to telecommunications, our analysis breaks down the LBO's deal fees for each transaction as a percentage of the target's enterprise value.