Best alternative to a negotiated agreement
Encyclopedia
In negotiation
theory, the best alternative to a negotiated agreement
or BATNA is the course of action that will be taken by a party if the current negotiations fail and an agreement cannot be reached. BATNA is the key focus and the driving force behind a successful negotiator. BATNA should not be confused with the reservation point or walkaway point. A party should generally not accept a worse resolution than its BATNA. Care should be taken, however, to ensure that deals are accurately valued, taking into account all considerations, such as relationship value, time value of money
and the likelihood that the other party will live up to their side of the bargain. These other considerations are often difficult to value, since they are frequently based on uncertain or qualitative considerations, rather than easily measurable and quantifiable factors.
The BATNA is often seen by negotiators not as a safety net, but rather as a point of leverage in negotiations. Although a negotiator's alternative options should, in theory, be straightforward to evaluate, the effort to understand which alternative represents a party's BATNA is often not invested. Options need to be real and actionable to be of value, however without the investment of time, options will frequently be included that fail on one of these criteria. Most managers overestimate their BATNA whilst simultaneously investing too little time into researching their real options. This can result in poor or faulty decision making and negotiating outcomes. Negotiatiors also need to be aware of the other negotiator's BATNA and to identify how it compares to what they are offering.
BATNA was developed by negotiation researchers Roger Fisher and William Ury of the Harvard Program on Negotiation (PON), in their series of books on Principled negotiation that started with Getting to YES
, unwittingly duplicating a game theoretic concept pioneered by Nobel Laureate John Forbes Nash
decades earlier in his early undergraduate research.
In this example, other offers that illustrate the difficulty of valuing qualitative factors might include:
Negotiation
Negotiation is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue, to produce an agreement upon courses of action, to bargain for individual or collective advantage, to craft outcomes to satisfy...
theory, the best alternative to a negotiated agreement
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
or BATNA is the course of action that will be taken by a party if the current negotiations fail and an agreement cannot be reached. BATNA is the key focus and the driving force behind a successful negotiator. BATNA should not be confused with the reservation point or walkaway point. A party should generally not accept a worse resolution than its BATNA. Care should be taken, however, to ensure that deals are accurately valued, taking into account all considerations, such as relationship value, time value of money
Time value of money
The time value of money is the value of money figuring in a given amount of interest earned over a given amount of time. The time value of money is the central concept in finance theory....
and the likelihood that the other party will live up to their side of the bargain. These other considerations are often difficult to value, since they are frequently based on uncertain or qualitative considerations, rather than easily measurable and quantifiable factors.
The BATNA is often seen by negotiators not as a safety net, but rather as a point of leverage in negotiations. Although a negotiator's alternative options should, in theory, be straightforward to evaluate, the effort to understand which alternative represents a party's BATNA is often not invested. Options need to be real and actionable to be of value, however without the investment of time, options will frequently be included that fail on one of these criteria. Most managers overestimate their BATNA whilst simultaneously investing too little time into researching their real options. This can result in poor or faulty decision making and negotiating outcomes. Negotiatiors also need to be aware of the other negotiator's BATNA and to identify how it compares to what they are offering.
BATNA was developed by negotiation researchers Roger Fisher and William Ury of the Harvard Program on Negotiation (PON), in their series of books on Principled negotiation that started with Getting to YES
Getting to YES
Getting to YES: Negotiating Agreement Without Giving In is a best-selling 1981 non-fiction book by Roger Fisher and William L. Ury. Reissued in 1991 with additional authorship credit to Bruce Patton, the book made appearances for years on Business Weeks "Best Seller" list...
, unwittingly duplicating a game theoretic concept pioneered by Nobel Laureate John Forbes Nash
John Forbes Nash
John Forbes Nash, Jr. is an American mathematician whose works in game theory, differential geometry, and partial differential equations have provided insight into the forces that govern chance and events inside complex systems in daily life...
decades earlier in his early undergraduate research.
Examples
The following examples illustrate the basic principles of identifying the BATNA and how to use it in further negotiations to help value other offers.Selling a car
If the seller of a car has a written offer from a dealership to buy the seller's car for $1,000, then the seller's BATNA when dealing with other potential purchasers would be $1,000 since the seller can get $1,000 for the car even without reaching an agreement with such alternative purchaser.In this example, other offers that illustrate the difficulty of valuing qualitative factors might include:
- An offer of $900 by a close relative
- An offer of $1,100 in 45 days (what are the chances of this future commitment falling through, and would the seller's prior BATNA (the $1000 offer from the dealership) still be available if it did?)
- An offer from another dealer to offset $1,500 against the price of a new car (does the seller want to buy a new car right now, and the offered car in particular?)