Firms like Papa John’s, Domino’s, and Pizza Hut sell pizza and other products that are differentiated in nature. While numerous pizza chains exist in most locations, the differentiated nature of these firms’ products permits them to charge prices above marginal cost. Given these observations, is the pizza industry most likely a monopoly, perfectly competitive, monopolistically competitive, or an oligopoly industry?

In the first instance it can be said that the pizza market is not likely to be of perfect competition or oligopoly, because in perfect competition the products are homogeneous and in oligopoly situation there are many entry barriers for new companies, for this reason it is correct to say that the pizza industry is monopolistically competitive because in this industry there are a large number of companies (Papa John's, Domino's, Pizza Hut, Chuck E. Cheese, among others) and buyers, there is also perfect information and there are few entry barriers for new companies that want to participate in this market (small companies or family businesses can enter this market by offering different types of pizza).

The most important characteristic of the monopolistically competitive industry is that the products offered in the market, in this case pizzas, are well differentiated (it can be said that companies differentiate pizzas through physical characteristics: ingredients, presentation, packaging) this allows consumers to perceive these products as unique, which allows companies to charge prices above marginal cost.