What Every Negotiator Should Know- BATNA and ZOPA

What Every Negotiator Should Know- BATNA and ZOPA

What Every Negotiator Should Know- BATNA and ZOPA 
Spring 2014, Asia Volume 5, Number 21

KNOW THE TERMS – What every negotiator should know

A Quick Intro

BATNA and ZOPA. Your BATNA is your Best Alternative To Negotiated Agreement. Your ZOPA is your Zone of Possible Agreement. In any negotiation, these two terms should be as familiar as your right and left hand, and used as such.

Your BATNA is extremely important; if you cannot secure one, or a few, you are in a very weak or no position to deal. Economists know this as your opportunity cost. Simply put, no BATNA equals no other viable opportunities and you can wrap up your negotiation right there. The BATNA is what to do when you do not reach a deal and ideally minimizes your losses; any offer that is less than your BATNA should be refused.

ZOPA is slightly more difficult to determine based only on the information that you readily have. You are not the only one with a BATA. The people you are negotiating with have a BATNA as well. Both your BATNAs combined creates the ZOPA and it is in this zone where your final outcome is most likel to be.

WHAT THIS

MEANT FOR YOU

The influence in a negotiation lies heavily on whichever party holds a stronger BATNA-this gives them less concession to deal with your offers. The choice lies in accepting the other party’s proposal or the alternative deal. Do your research thoroughly and strengthen your BATA before entering a negotiation. Be mindful of the fact that you may now always be privy to knowing the other party’s BATNA, thus you would not be able to sufficiently prepare for a counter offer.

Since your ZOPA depends on both parties BATNA, the ideal situation would be to start your negotiation off with clear lines of communication if you want to know the ZOPA. Remember, the other party is not obliged to put down all their cards on the table from the get-go. Establishing a basis of communication would save you trouble from hard tactics later on, but both parties have to be willing.

PUTTING INTO

ACTION

Let’s put theses terms to use in the following scenario.

In an auction of a $100 where the first bid must be $5, and subsequent bids can only be $5 above the previous bid.

Assuming the bid has reached $95, your BATNA would be to bid $100 and hopefully break even with your win if no one else bids. However, the other person who bid $95 has the same incentive or BATNA to bid $105 and have a net loss of $5 instead of $95.

Do you keep going? You have no clear idea of the ZOPA, and your BATNA would require you to always pitch in more money. If you had the foresight that this would happen, you would not have entered the auction in the first place, which is why it would have been wise to not negotiate at all or to drop out before you became one of the last two bidders.

60 Seconds

is All it Takes
to Know a Little More
Quick Tip1

Your BATNA is extremely important; if you cannot secure one or a few, you are in a very weak or no position to deal.

Quick Tip2

Since your ZOPA depends on both parties BATNA, the ideal situation would be to start your negotiation off with clear lines of communication if you want to know the ZOPA

Quick Tip3

Establishing a basis of communication would save you trouble from hard tactics later on, but both parties have to be willing.

Quick Tip4

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