Page 27 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.80, # 1, 2023, pp. 21-34

Concerning the above conditions, some questions will arise including, where is the
optimal location of sale agent in this city? Will the sale agent be launched at city center
or in another street? In what condition is it better to launch sale agent at city center
than margins?

In what condition is the sale agent at city center more profitable for monopolist than
several agents in margin areas? In what condition will the monopolist agree with
launching a sale agent at city center and several sale agents in suburb areas instead of
just one sale agent at city center? At the end, how will the monopolist decide on the
number and location of sale agents? In following, these questions will be studied and
the results will be analyzed.

SELECTION OF LOCATION AND NUMBER OF SALE AGENTS
The aim of monopolist is to specify first where to select the location of sale agents in
which part of city, and secondly, how many sale agents to launch. To this end, in
follow, the monopolist's options will be studied in various conditions.

First state: Launching a sale agent at city center or suburb area
First this question will be studied that if the monopolist intends just to have one sale
agent, where is the optimal location, at city center or city margin? The answer to this
question is presented in theorem 1:

Theorem 1:
If the monopolist wants to launch just one sale agent and the following condition is
established,

2
2 ( ) + (1 − − 2 ) − ( − 1)
≥ 2
− 1
Then the optimal location of sale agent will be at city center rather than city margin.

Proof:
First we will obtain the situation of indifferent consumer in respect to purchase from
sale agent at city center or his failure in purchase. Concerning the same length of
streets and therefore the same situation of indifferent consumer on each street, in order
to achieve the indifferent consumer in this state, we have:

D
B − − p = 0 ⇒ ̂ = −

If the sale agent is located at city center, based on the assumptions of the model, all
D
consumers with non-negative surplus (B − − p ≥ 0) will purchase the intended

good. Concerning the constraint related to achievement of non-negative profit γ by
the sale agents, the maximum price that the monopolist could demand from sale agent
will be achieved from the following equation:

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