What economic principle holds that a property's maximum value tends to be set by the cost of acquiring an equally desirable substitute property?

PRINCIPLE OF SUBSTITUTION: A rational buyer will pay no more for a property than the cost of acquiring an equally desirable SUBSTITUTE property. This principle underlies the SALES COMPARISON APPROACH (and influences all three approaches) — if a comparable home is available for less, the buyer won't pay more for the subject; OTHER VALUATION PRINCIPLES: CONTRIBUTION: The value of an improvement is measured by its contribution to the whole property's value, not its cost (a $50,000 pool may add only $20,000 to value); CONFORMITY: Maximum value occurs when properties are similar/conform to the neighborhood; ANTICIPATION: Value is based on expected future benefits (income, appreciation); SUPPLY AND DEMAND: Value rises when demand exceeds supply; HIGHEST AND BEST USE: The legally permitted, physically possible, financially feasible, and most profitable use; PROGRESSION/REGRESSION (a lesser property gains value near better ones / a better property loses value near lesser ones); the principle of substitution is foundational to appraisal and a key national exam concept — it establishes that comparable alternatives cap what a buyer will pay.