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4 Analysis
Although there is a huge amount literature on Mergers and Acquisitions (M&A) 6 , we will approach
the analysis of the Mattel-Radica deal from a game-theoretic perspective using Gans and Stern
(2000) model. We recognize that a model is an abstract representation of reality so it is di¢ cult
to …nd a perfect match for a given model in the real world; however, recognizing the limitation
of this approach, we think Gans and Stern framework is useful to take into account a di¤erent
perspective in a M&A process, that is the use of technology and knowledge as a bargaining tool
(Aghion and Tirole, 1994). We contribute by adding this new dimension to the M&A literature,
analyzing this speci…c case 7 .
4.1 Players and timing
The players of the Mattel-Radica acquisition game are of course Mattel and Radica. Mattel,
although it is not strictly speaking a monopoly, has enough market power and leadership in the
worldwide toy industry, that it could be consider as player M in Gans and Stern model. Also,
and without much controversy, Radica could be regarded as player E, the relatively small …rm
but competent in generating technological innovations. In our context, Radica is not working to
develop a speci…c innovation but helping to develop the electronic toy industry altogether.
As it was shown above, electronic games are growing much faster than any other segment in
the industry, so in the toy industry, as in the model, there is a sense of a competitive “race”. In
the speci…c case of the model, the “race”is to be the …rst to develop the innovation; in our case,
the “race”is to gain market share in a growing segment of the toy industry.
If Mattel, with all of its market power, were the leader of the electronic toy segment, there would
6 See Grimblat and Titman (2002) for a summary.
7 From the theory perspective a speci…c case could serve as a “conceptual test”of a speci…c theory (Yin, 2003).
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