In this ad for Los Pollos Hermanos, the narrator speaks of the importance of quality in the production process. Higher quality inputs imply a higher quality of output, whether it’s rotisserie chicken or crystal meth. Walter uses only the finest ingredients, in a state-of-the-art facility to produce the most popular version of meth on the market. This scene highlights the relationship between inputs and outputs in the production process.
The video clip is also helpful for discussing the principal-agent contract. More specifically, the clip presents Gus Fring as he supervises the packaging and loading of methamphetamine into trucks for distribution purposes. Gus is the owner of Los Pollos Hermanos, the man running the methamphetamine production operation, and therefore the principal. The laborers packaging the methamphetamine and the truck drivers transporting it are the agents. Sometimes agents do not act in the principal’s best interest. This behavior is also known as shirking, and one can prevent or limit it through adequate monitoring activities, which is precisely what Gus does.
This description adaptaed from Duncan, Muchiri, and Paraschiv (Forthcoming)
See more: quality, fixed costs, production, total costs, underground economy, profit maximization, fixed inputs, variable inputs, variable cots, differentiation, advertising