Reservation price

In economics, a reservation (or reserve) price is a limit on the price of a good or a service. On the demand side, it is the highest price that a buyer is willing to pay; on the supply side, it is the lowest price a seller is willing to accept for a good or service.

Reservation prices are commonly used in auctions, but the concept is extended beyond. A party's best alternative to a negotiated agreement (BATNA) is closely related to their reservation price. Once a party determines their BATNA, they can then calculate their reservation price. In negotiations surrounding the price of a particular good or service, the reservation price is a singular number. However, this is not the only situation in which reservation prices are seen. When multiple issues are being discussed, such as the size of salary and amount of benefits when applying for a new job position, the reservation price would be represented as a package where multiple requirements need to be met.[1]

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