Is there a limit on maximum of participants in a multi user chat (MUC) on XMPP? If the number of participants is very large, in this case what will be the drawback for using MUC vs PubSub, assuming the communication is only one-to-many i.e. only Group Administrator sends messages to participants, like PubSub?
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There is no hardcoded limit in ejabberd. All depends on your use case and your MUC configuration. You can even use MUC without broadcasting presence to other members. This is defined as options muc#roomconfig_presencebroadcast
in XEP-0045.
As such it can behave much like Pubsub, but taylored at a chat use case.
This is, among other things, a topic that is dealt in an ejabberd talk: Implementing State of the Art One-to-Many Chat Services with ejabberd - ejabberd Workshop #1 (Video).

Mickaël Rémond
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I can see that presencebroadcast is defined in mod_muc_room.erl . To disable presencebroadcast for MUC do we need to make some changes in mod_muc_room.erl or we can simply write, like this: {default_room_options, {presence_broadcast, false},} inside ejabberd configuration file? – BeinTouch Jan 21 '16 at 03:44
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You can change default room options. – Mickaël Rémond Jan 21 '16 at 11:03