The mistake PSG made was not seeling Mbappe to Madrid when they were ready two seasons ago. PSG shouldn't have pressured Mbappe into signing a new deal. They had a chance to sell him for 180 million and they blew it, now they will either sell him for less or lose him for free.
The ultimatum given to Mbappe is that it's either he signs a new deal or he'll be sold this summer. PSG are willing to keep if, but they're also ready to sell. Meaning they are not going to try and make him sign another contract. The decision is his.
Madrid on the other hand are not sure if they are ready to pay big money for a guy they can someone get for free next season.
It'd be interesting to see how things unfold.
The scenario is not that simple, PSG definitely don't want to lose Mbappe for free they must be doing something like offering him to the Premier League, we know now the clubs in the Premier League need a striker Manchester United, Chelsea definitely interested to bring it. If PSG open a 100 million bid, I'm sure many clubs will be interested, it's the last step that can be done if there is no other option or Mbappe will go for free.