Over Spring Break, you may have noticed that Pizza prices have become higher in some pizza parlor around the country. Are these arbitrary events, or are they the results of interaction of a complex economic network?

Given what we have learned in ECON 204, it is not surprising that the rise of pizza prices are not an arbitrary event. Indeed, the owners of pizza restaurants have experienced a drastic increase in the cost of basic ingredients that they need for everyday operation, such as flour and cheese. These have resulted in large increases in the cost of running a pizzeria in many locations in the United States.

As unrelated as it sounds, activism in sustainability shares part of the blame for the increased pizza prices. Such activism has led to devoting an increased number of acres of farmland to corn, one of the components used to manufacture biofuels. Due to the complex economic network that underlies the nation’s limited farmland, this means that less wheat is produced, and in turn, there is less flour to sell to pizza-makers. To make matters worse, cold and wet weather have destroyed much of the remaining wheat crop this year.

The result might be devastating to the operators of smaller pizza shops: doubling of the cost of flower in a month. Other vital components for pizza have also become much more expensive than in the past: cheese cost have multiplied by two, cooking oil prices have tripled, and motor fuel costs are rising rapidly, all within the last year.

This leaves the owners of such businesses with an interesting question: how to maintain profitability, the loyalty of customers, and the quality of their product in the face of these significant changes. There have been different solutions:

- Some shops have raised prices

- Some shops have cuts costs not related directly to their food products

- Some shops have chosen to decrease portion sizes

It is unclear how many shops will be forced out of business by this situation. What is clear is that the complex interactions in networks cannot be ignored in any business line or field.

References:

http://findarticles.com/p/articles/mi_qn4176/is_20080301/ai_n24373538

http://www.timesunion.com/AspStories/story.asp?storyID=674157