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.
If the current negotiations are giving you less value than your BATNA, there is no point in proceeding. Prior to the start of negotiations, the parties should have ascertained their own individual BATNAs.
BATNA was developed by negotiation researchers Roger Fisher and Bill Ury of the Harvard Program on Negotiation (PON), in their series of books on Principled Negotiation that started with Getting to YES. Nobel Laureate John Forbes Nash has included such ideas in his early undergraduate research.
For example, if I have a written offer from a dealer to buy my car for $100 dollars, then my BATNA when dealing with other potential purchasers would be $100 since I can get $100 for my car even without reaching an agreement with such alternative purchaser.
A party should generally never 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, likelihood that the other party will live up to their side of the bargain, etc.) These other considerations are very difficult to value, since they are often based on uncertain considerations, rather than easily measurable and quantifiable factors.
Examples of other offers that might or might not be better than the BATNA in the example above might be:
An offer of $90 by a close relative (is the goodwill generated worth $10 or more?)
An offer of $125 in 45 days (what are the chances of this future commitment falling through, and would my prior BATNA ($100) still be available if it did?)
An offer from another dealer to offset $150 against the price of a new car (do I want to buy a new car right now, the offered car in particular? Also, is the probably minuscule reduction in monthly payments worth $100 to me today?)
BATNA is seen in negotiation fields as the single most important source of negotiation power. Negotiators don't use their BATNA merely as a safety net, but rather as a point of leverage in negotiations.
Consider the following business example: Company one can choose to buy from companies two, three and four - but companies two, three and four can only sell to company one. Company one can use their powerful BATNA position to leverage a better deal by playing companies two, three and four against each other. This is a common practice among purchasing and procurement managers in the business world.
Whilst your alternative options, and therefore your BATNA might be known to you, very often your BATNA may not be. So time and energy are demanded to figure out which options are really available to you and actionable. Even if your alternative options are known, they need to be real and actionable. A Project on Negotiation Executive Seminar experiment and other experiments have proven that most managers overestimate their BATNA whilst simultaneously investing too little time into researching their real options. This results in poor or faulty decision making from overconfidence and good choices being rejected.
