Behavioral & Game Theory · Walter

Walt’s Credible Threat

To end the series, Walter needs to find a way to get his money to his son, but he knows that the federal government would confiscate the money if he does it himself. Instead, he seeks help from his former business associations, Elliot and Gretchen Schwartz. He asks them to launder the money through their business so that it appears to be a charitable donation. The Schwartz’s agree, but because he’ll die soon, Walter has no guarantee that they will actually go through with the donation.

Walter tells the Schwartz’s that he’s hired “the best hitmen” that he could find and that if the money is not donated to his son shortly after his son’s 18th birthday then Elliot and Gretchen will be assassinated. In order for such a threat to be credible, Walter hires Pete and Badger to stand outside the house and point laser pointers at the two of them to have them believe they were actually snipers. Walter’s persona leads to his credibility as well.

See more:  asymmetric information, credible threat, game theory, imperfect information, incentives, insurance, opportunity cost, risk averse, strategic behavior, ultimatum game

Gus · Market Structures · Walter

Controlling the Market

Gus is set on controlling the market for meth in the Southwest. He has worked hard to eliminate the local drug cartel so that he can be the sole supplier. Being the only supplier of a product gives a firm market power to charge prices greater than marginal cost. While profit maximization still occurs where marginal cost equals marginal revenue, a firm with market power is able to charge a markup on top of the marginal cost. Further, the markup is inversely proportional with the price elasticity of demand coefficient (i.e. the more inelastic the demand, the higher the markup). As the number of substitutes (competitors) decreases, the demand for each firm becomes more inelastic, which, in turn allows the firm to charger higher prices.

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Foundations · Gus · Walter

Parking Lot Decision

Gus and his people leave the meeting at the hospital with Jesse and head back to their car in the parking garage. As they approach the car, Gus stops and begins to look around at the rooftops around the garage. Walter is on a nearby rooftop and hides as Gus stands right across from him waiting and thinking. He decides to abandon his car, as he fears it may be a trap.

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