Negotiation glossary
What is Reservation price?
Updated 8 October 2026 · 4 min read
Your reservation price is the least favourable terms you will accept before you prefer your best alternative (your BATNA). For a seller it is a minimum, for a buyer a maximum; it is the one number to fix before a negotiation and never to reveal during it.
If your best alternative to this apartment is a similar one at 285,000 euros with a longer commute, your reservation price for this one is around 295,000: the extra 10,000 is what the shorter commute is worth to you. Above that, the other apartment is the better deal and you should take it. Below that, you have room to negotiate.
Why people skip it, and what it costs them
Setting a reservation price forces you to admit what you will do if this fails, which is uncomfortable. So most people go in with a vague "I'll see how it goes". The result is predictable: under pressure, the limit becomes whatever the other side's last offer was. Buyers overpay, sellers undercharge, and both explain afterwards that "the price was reasonable".
How to set it
- Identify your BATNA, concretely
- Price the differences between the alternative and this deal (time, risk, quality, relationship)
- The reservation price is the BATNA adjusted for those differences
- Write it down, in numbers, before the first message
How to use it at the table
- Never state it. A revealed reservation price becomes the other side's target
- Open far from it. Your anchor should sit at the ambitious end of the ZOPA, leaving room for concessions that still land above your floor
- Stop when you reach it. The point is to decide once, calmly, rather than in the heat of the last exchange
A worked example
A startup founder raising a seed round has a term sheet at a 12 million valuation from a fund she likes less. Her reservation price with the fund she prefers is about 11 million: she would give up a million for the better partner, and not more. When that fund offers 10, the founder who has done this exercise says no without drama; the one who has not spends a week rationalising.
Reservation price, target and BATNA side by side
| Concept | What it is | Example (buying an apartment) | Do you reveal it? |
|---|---|---|---|
| BATNA | Your best alternative if this deal fails | A similar flat at 285,000 euros, 25 minutes further away | Only if it is strong and verifiable |
| Reservation price | The worst terms you still accept for this deal | 295,000 euros | Never |
| Target | The outcome you aim for and open toward | 270,000 euros | No, you open slightly beyond it |
| Walk-away point | The moment you stop, once the reservation price is reached | The seller refuses to go under 300,000 | You say you are leaving, not why |
Seen together, the four numbers explain most negotiations. The target sets your opening, the reservation price sets your limit, and the BATNA is the reason the limit is where it is.
Seller and buyer: two reservation prices, one zone
Each side has its own reservation price. For a seller it is a minimum, for a buyer a maximum. If the seller of the apartment would accept anything from 280,000 and the buyer would pay up to 295,000, every price between the two is acceptable to both: that range is the ZOPA. Neither side knows the other's number, which is why the opening offers and the questions asked in the first minutes matter so much.
When the seller's minimum is above the buyer's maximum, there is no zone on price. A deal is still possible if the conversation adds another issue that one side values more than the other, for example a later move-in date that saves the seller a bridging loan.
Common mistakes
- Setting it after the first offer. The other side's opening then becomes your reference point, which is anchoring working against you
- Confusing it with the target. People who aim at their limit end up conceding past it
- Moving it under pressure. A deadline or a frown is not new information; only a new alternative or a better deal justifies a change
- Keeping it in your head. Written numbers survive a tense conversation; remembered ones drift
Where the term comes from
The idea was formalised by Howard Raiffa in The Art and Science of Negotiation (1982), where he called it the reservation value and used it, with the other side's reservation value, to define the zone of agreement. Negotiation courses today teach it together with the BATNA from Getting to Yes (Fisher and Ury, 1981): the BATNA tells you what you can do without this deal, the reservation price tells you what that means in numbers.
Every Negosim scenario gives the counterpart a hidden reservation price; the analysis afterwards tells you whether you crossed your own.
Related terms
- BATNA: Your BATNA (Best Alternative To a Negotiated Agreement) is the best option you already have if this negotiation ends without a deal. Any agreement worse than your BATNA should be refused; any agreement better than it is worth considering.
- Walk-away point: The walk-away point is the point at which you end the negotiation and turn to your best alternative because any further concession would leave you worse off. It is your reservation price seen as an action rather than a number, and it only protects you if you set it before the conversation starts.
- ZOPA: The ZOPA (Zone Of Possible Agreement) is the overlap between what one side is willing to accept at most and what the other side is willing to accept at least. Every deal that will ever be signed lies inside it; when the two limits do not overlap, there is nothing to negotiate about.
