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. 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 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], however without the investment of time, options will frequently be included that fail on one of these criteria.^{[citation needed]} A Project on Negotiation Executive Seminar experiment and other experiments have demonstrated that 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.

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.^{[citation needed]}

1 Examples
- 1.1 Selling a car
- 1.2 Purchasing
2 See also
3 References
4 External links

[edit] 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.

[edit] Selling a car

If I have a written offer from a dealer to buy my car for $100, 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.

In this example, other offers that illustrate the difficulty of valuing qualitative factors might include:

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?)

[edit] Purchasing

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.