The Forest Service sells timber on its land to loggers who then cut it down and are supposed to replant after logging. The Gains from Trade To study individual transactions, we postulate a buyer and a seller. The buyer's value of an item is determined by how much he is willing to pay for the item, his top dollar, or his reservation price. He is unwilling to pay more than his top dollar. The buyer's reservation price is determined by the opportunity cost of the transaction.
Opportunity cost is measured by the value of the next best alternative to the buyer.
Likewise, the seller's reservation price, bottom line, or value, is determined by her next best alternative. Suppose that the next best alternative to selling the house is renting it. When a seller's bottom line is below a buyer's top dollar, anything that transfers the asset from the seller to the buyer creates wealth. One simple way to move the asset is to let the seller and the buyer get together and try to agree on a price. In general, such voluntary transactions makes both parties better off and thereby create wealth.