reservation price

Reservation price is the highest price a buyer is willing to pay for a good or service, or the lowest price a seller is willing to accept. It represents the limit at which the transaction becomes undesirable for either party. For buyers, it reflects their maximum valuation or budget; for sellers, it indicates the minimum acceptable profit. Understanding reservation prices helps in pricing strategies and negotiations, as they define the boundary within which a deal can occur. This concept is key in market transactions, negotiations, and economic decision-making.