BATNA and ZOPA Negotiation

BATNA Refers to the Alternatives each Party has in a Negotiation Process that would avoid moving their Acceptance limit beyond a certain point.

• These alternatives are outside the Negotiation and particular to each Party.

 

It is the Limit, each Party has, due to their Access to a Real and Viable Alternative.

• An Alternative to the Product or Price that is being Negotiated.

 

Its name is an acronym for Best Alternative To a Negotiated Agreement.

 

BATNA Example

 

Imagine that you want to buy a New Car.

Your friend has offered you his, for $5,000.

 

However, you want to see what is in the Market.

 

One day, you find a Dealer that offers a nice car for $6,000.

• A car of Quality and Age similar to that of your friend.

 

You then Start Negotiating with the Dealer about the Price.

 

As you may imagine, the Maximum Price you will be willing to Pay is $5,000.

• That is your BATNA.

The ZOPA is the Range of Prices where Two Parties can Reach an Agreement.

• What Positions can result in an Agreement.

 

The ZOPA is located between the BATNAs of both Parties.

 

Its name is an acronym for Zone Of Possible Agreement.

 

ZOPA Example

 

Following with the Previous example:

The Dealer has another Client that is willing to pay $4,000 for that car.

 

That is his BATNA.

• A Price he can immediately obtain and is acceptable for him.

 

The ZOPA of this Negotiation is between $5,000 (your BATNA) and those $4,000.

• The two of you can come to an Agreement in this Price Range.

BATNA and ZOPA Model

 

Before looking at more examples, we want to give you some Tips on How to identify BATNAs.

• Since they are the References that best define a Negotiation Process.

Study the Alternatives that each Party has.

• Real Alternatives that can be adopted without any problem.

 

Try to find Substitute Solutions for each Party and How much they Cost.

• Different types of Solutions, ordered by Cost and Feasibility.

 

Define what you (or the other Party) would do if the Negotiation failed.

• What would each Party do? How much would it cost?

 

Request the other Party for Proof of its Alternative Solutions.

• This will push it to uncover its BATNA (if it is Real).

The best way to understand what BATNA and ZOPA are, and Why they are useful, is by sharing some examples with you:

There are hundreds of different Business Situations in which BATNA and ZOPA can be used.

• That is why we have chosen 2 day to day examples.

 

Because, perhaps, you have experience one of these two Situations.

 

Let’s begin:

 

Imagine that you want to Negotiate a Salary Increase (we all do).

 

The First thing you should do is to find your BATNA.

• As well as the BATNA of your Employer.

 

Your BATNA would be:

The Salary that other Company offers you

• Which is higher than your current one.

 

You wouldn’t accept a Salary lower than your BATNA.

• Otherwise, you would move to the other Company.

 

Your Employer BATNA is:

The Salary that a New Employee with your same Experience would accept.

 

Once you find them out, you will be able to identify your ZOPA.

• The Range of Salaries that you two would accept.

 

Let’s see it graphically:

BATNA and ZOPA of a Salary Increase Negotiation.

 

Now, we’ll imagine that you are thinking about moving to a bigger house.

• You are about to have your second child, and you want a bigger house.

 

However, your current house is fine, and you have a lease for an additional year.

 

This is your BATNA:

Staying in your current home for one additional year.

 

One day, you find an interesting House that meets all your Requirements.

• It is bigger, it is well located, it is close to a nice school, etc.

 

The New Landlord whose house you are interested in, has more Clients interested.

 

That is the BATNA of the New Landlord:

The Rent other Interested tenants are willing to pay.

 

Let’s see it graphically:

BATNA and ZOPA of a Rent Negotiation.

BATNA Refers to the Alternatives each Party has in a Negotiation Process that would avoid moving their Acceptance limit beyond a certain point.

• It is the Limit, each Party has, due to their Access to a Real and Viable Alternative.

 

The ZOPA is the Range of Prices where Two Parties can Reach an Agreement.

• The ZOPA is located between the BATNAs of both Parties.

 

How to identify a BATNA:

• Study the Alternatives that each Party has.
• Try to find Substitute Solutions for each Party and How much they Cost.
• Define what you (or other Party) would do if the Negotiation failed.
• Request the other Party for Proof of its Alternative Solutions.