Reservation Price

02What People Think

The first asking price is the seller’s real limit, or a reservation price must be a charge for making a booking.

03What’s Underneath

A buyer has some highest acceptable price and a seller some lowest acceptable price for a given transaction. These are their reservation prices. Offers beyond those limits are worse than walking away, assuming the other features of the deal stay the same.

Imagine a sofa seller who will accept one hundred dollars but refuses ninety-nine. The small difference is funny because it crosses a real boundary. If the seller originally asked for two hundred, that opening number and the one-hundred-dollar minimum perform different jobs. One starts the negotiation; the other separates acceptance from rejection.

The boundary can depend on alternatives, urgency, condition, delivery, and other circumstances. A buyer who can obtain an identical item elsewhere may have a different limit from someone who needs it immediately. In a deal with several issues, the acceptable package can matter more than a single price. The term names a decision threshold, not an objective measure of universal value.

04The Game

Where does this person actually stop agreeing? An offer below the seller’s limit is rejected; an otherwise identical offer at the limit is acceptable. The opening demand may be considerably higher than either.