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Best alternative to a negotiated agreement

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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. 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,[1][third-party source needed] however without the investment of time, options will frequently be included that fail on one of these criteria.[citation needed] Most managers overestimate their BATNA whilst simultaneously investing too little time into researching their real options.[citation needed] 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.[2][page needed]

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 the game theory concept of a disagreement point from bargaining problems pioneered by Nobel Laureate John Forbes Nash decades earlier.[3][4] A Nash Equilibrium is reached among a group of players with a choice of strategies, when no player can benefit from changing strategies if every other player sticks to their current strategy.[5] For example, Amy and Phil are in Nash Equilibrium if Amy is making the best decision she can, taking into account Phil's decision, and Phil is making the best decision he can, taking into account Amy's decision. Likewise, a group of players are in Nash Equilibrium if each one is making the best decision that he or she can, taking into account the decisions of the others.

A ruthless, aggressive and cold blooded negotiation style is the framework approach most people have when it comes to negotiation,[6] a theoretical example of that is Adversarial Approach Style Negotiation.[6] But in reality, as mentioned by experts and researchers such as Fisher and Ury [3] it doesn’t have to be that way. As the world moves to more sophisticated platforms of communication, negotiation follows the trend and Problem-Solving Approach is in a way, the "antidote" of Adversarial Approach Style Negotiation. Getting to YES[3] suggest an Interest-Based Model for the use of Problem-Solving Approach. Interest-Based Model focus on separating the person (positional) from the problems (resolution) and then concentrate on the resolution. This lets each party attain its goals in a distributive way.

Attractive Alternatives is needed to develop a very strong BATNA. In Getting to YES, the authors give 3 suggestions of how you can accomplish this:

  1. Inventing a list of actions you might take if no agreement is reached
  2. Converting some of the more promising ideas and transforming them into tangible and partial alternatives
  3. Selecting the alternative that sounds best

BATNA rules: A BATNA is not disclosed unless it's beneficial.

In negotiations involving different cultures, all parties need to account for cultural cognitive behaviors and not allow judgments and biases to affect the negotiation. The individual should be separate from the objective.[3][page needed]

The purpose here, as Gulliver mentions, is for negotiation parties to be aware.[7]

Preparation at all levels, including prejudice-free thoughts, emotion-free behavior, bias-free behavior are helpful according to Morris and Gelfand.[8]

Examples

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 an 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 $1,000 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?)

Purchasing

Buyers are often able to leverage their BATNA with regard to prices. This is done through buying from the lowest cost or best value seller.

See also

References

  1. ^ Best Alternative to a Negotiated Agreement | Negotiation Experts
  2. ^ Negotiation, Readings, Exercises and Cases, Roy J. Lewicki[full citation needed]
  3. ^ a b c d Fisher and Ury, Roger and William (2011). Getting to YES. Penguin Books. pp. 1–170. ISBN 978-0-14-311875-6.
  4. ^ Myerson, Roger B. "Nash Equilibrium and the History of Economic Theory" (PDF). Nash Equilibrium and the History of Economic Theory. Journal of Economic Literature. Retrieved 1 October 2012.
  5. ^ Hawkins and Steiner, Jeff and Neil. "The Nash Equilibrium Meets Batna" (PDF). Gamed Therory Varied Uses in ADR. Harvard University Press. Retrieved 1 October 2012.
  6. ^ a b Nolan-Haley, Jaqueline M (2001). Alternative Dispute Resolution in a Nutshel. Thomson West. pp. 39–50. ISBN 978-0-314-18014-8.
  7. ^ Gulliver, P.H (1979). Disputes and Negotiation: A Cross Culture Perspective. Academic Press. p. 287.
  8. ^ Morris, Michael W.; Gelfand, Michele J. (2004). Gelfand, Michele J.; Brett, Jeanne M. (eds.). Cultural Differences and Cognitive Dynamics: Expanding the Cognitive Perspective on Negotiation. Stanford University Press. pp. 45–70. ISBN 978-0-8047-4586-4. {{cite encyclopedia}}: |work= ignored (help)
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