Question

Evaluate Product Differential Strategy in a Monopolistic Competition Market

When the first Pizza Hut opened its doors back in 1958, it offered consumers one style of pizza: its Original Thin Crust Pizz. Since its modest beginnings, Pizza hut has established itself as the leader of the $25 billion pizza industry. Today, Pizza Hut offers six styles of pizza, including Pan Pizza, Stuffed Crust Pizza, and its Hand-Tossed Style. Explain why Pizza Hut has expanded its offerings of pizza over the past five decades and discuss the long run profitability of such a strategy.

Answer 1

Pizza hut is operating in a monopolistic market. Here, all the goods are slightly different and the firms in the market depend in advertisement to differentiate their own goods from the other. In the long run,there are no profit as firms are free to enter the market.

Pizza hut has launched so many different pizza to differentiate themselves form the others. That will ensure they act as a monopoly over the new range and earn maximum profit even in the long run. If that doesn;t happen Pizza huts profit without differentiation will be zero.