Wednesday, March 17, 2010

What is Reservation Price in Negotiations?

Your reservation price (also referred to as your "walk-away") is the least favorable point at which you would accept a deal. Your reservation price should be derived from your BATNA, but it is not usually the same thing. If the deal is only about money, however, and a credible dollar offer is your BATNA, then your reservation price would be approximately equal to your BATNA.

Example: When preparing to negotiate with a commercial landlord over a lease for office space, you determined that you would not pay more than $20 per square foot in a downtown high-rise. If more than that is required, you will walk away and attempt to lease space in a different building. At the end of a lengthy negotiation session, the landlord declares that he will not accept less than $25 per square foot. You graciously suggest that the negotiations be terminated and walk away from the deal

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