The principle of fair and reasonable pricing is something we should consider when making a purchase.

A Fair and Reasonable price can be defined as the price a prudent businessperson would pay for an item or service under competitive market conditions, given a reasonable knowledge of the marketplace.  Fair implies a proper balance of conflicting interests.  Reasonable means not extreme or excessive.  So a fair and reasonable price is one that is balanced and somewhat moderate.  Ensure your offer fits within the realm of fair and reasonable in order to promote a successful negotiation.

The regulations governing Federal Contracting says no contract is to be awarded unless the price is determined fair and reasonable.  Typically it is done by getting competitive bids or if competitive bids are not received, then a determination must be made as to price being fair and reasonable. In the absence of competition (bids) it can be determined by many factors such as a commercial price list, past pricing for same or similar item etc.

Basically fair and reasonable is what the market can bear.  For instance, a 4 br house in Orange County California in Aliso Viejo went for close to a million dollars a few years ago.  That same house is now priced in the $600,000 range.  It’s the same house but after the housing market crashed the prices were driven down.  A million dollars for that house is no longer a fair and reasonable price.

When you are pricing things and making determinations of how the price is structured or whether or not the price is a good one.  Take into account the definition of a fair and reasonable price before making your purchase or deal.