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Best Alternative to a Negotiated Agreement (BATNA)

By
Brad Spangler*
June 2012

What BATNAs Are
BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller, Getting
to Yes: Negotiating Without Giving In.[1] It stands for "best ALTERNATIVE to a negotiated
agreement." Said another way, it is the best you can do if the other person refuses to negotiate
with you--if they tell you to "go jump in a lake!" or "Get lost!" So it is not necessarily your
ideal outcome--unless your ideal outcome is something you can get without the cooperation
of the other person. It is the best you can do WITHOUT THEM.

BATNAs are critical to negotiation because you cannot make a wise decision about whether
to accept a negotiated agreement unless you know what your alternatives are. Your BATNA
"is the only standard which can protect you both from accepting terms that are too
unfavorable and from rejecting terms it would be in your interest to accept."[2] In the
simplest terms, if the proposed agreement is better than your BATNA, then you should accept
it. If the agreement is not better than your BATNA, then you should reopen negotiations. If
you cannot improve the agreement, then you should at least consider withdrawing from the
negotiations and pursuing your alternative (though the costs of doing that must be considered
as well).
Having a good BATNA increases your negotiating power. Therefore, it is important to
improve your BATNA whenever possible. Good negotiators know when their opponent is
desperate for an agreement. When that occurs, they will demand much more, knowing their
opponent will have to give in. If the opponent apparently has many options outside of
negotiation, however, they are likely to get many more concessions, in an effort to keep them
at the negotiating table. Thus making your BATNA as strong as possible before negotiating,
and then making that BATNA known to your opponent will strengthen your negotiating
position.

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Guy Burgess and Heidi Burgess have adapted the concept of
BATNA slightly to emphasize what they call "EATNAs"
estimated alternatives to a negotiated agreement" instead of
"best alternatives." Even when disputants do not have good
options outside of negotiations, they often think they do. (For
example, both sides may think that they can prevail in a
military struggle, even when one side is clearly weaker, or
when the relative strengths are so balanced that the outcome
is very uncertain.) Yet, perceptions are all that matter when it
comes to deciding whether or not to accept an agreement. If a
disputant thinks that he or she has a better option, she will,
very often, pursue that option, even if it is not as good as she
thinks it is.
BATNA and EATNAs also affect what William Zartman and
may others have called "ripeness," the time at which a dispute
is ready or "ripe" for settlement.[3] When parties have similar ideas or "congruent images"
about what BATNAs exist, then the negotiation is ripe for reaching agreement. Having
congruent BATNA images means that both parties have similar views of how a dispute will
turn out if they do not agree, but rather pursue their other rights-based or power-based
options. In this situation, it is often smarter for them to negotiate an agreement without
continuing the disputing process, thus saving the transaction costs. This is what happens
when disputing parties who are involved in a lawsuit settle out of court, (which happens in
the U.S. about 90 percent of the time). The reason the parties settle is that their lawyers have
come to an understanding of the strength of each sides' case and how likely each is to prevail
in court. They then can "cut to the chase," and get to the same result much more easily and
more quickly through negotiation.
On the other hand, disputants may hold "dissimilar images" about what BATNAs exist,
which can lead to a stalemate or even to intractability. For example, both sides may think
they can win a dispute if they decide to pursue it in court or through force. If both sides'
BATNAs tell them they can pursue the conflict and win, the likely result is a power contest.
If one side's BATNA is indeed much better than the other's, the side with the better BATNA
is likely to prevail. If the BATNAs are about equal, however, the parties may reach a
stalemate. If the conflict is costly enough, eventually the parties may come to realize that

"The reason you negotiate is
to produce something better
than the results you can
obtain without negotiating.
What are those results? What
is that alternative? What is
your BATNA -- your Best
Alternative To a Negotiated
Agreement? That is the
standard against which any
proposed agreement should
be measured." -- Roger
Fisher and William Ury

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their BATNAs were not as good as they thought they were. Then the dispute will again be
"ripe" for negotiation.
The allure of the EATNA often leads to last-minute breakdowns in negotiations. Disputants
can negotiate for months or even years, finally developing an agreement that they think is
acceptable to all. But then at the end, all the parties must take a hard look at the final outcome
and decide, "is this better than all of my alternatives?" Only if all the parties say "yes," can
the agreement be finalized. If just one party changes his or her mind, the agreement may well
break down. Thus, knowing one's own and one's opponent's BATNAs and EATNAs is
critical to successful negotiation
Determining Your BATNA
BATNAs are not always readily apparent. Fisher and Ury outline a simple process for
determining your BATNA:
1. develop a list of actions you might conceivably take if no agreement is reached;
2. improve some of the more promising ideas and convert them into practical options;
and
3. select, tentatively, the one option that seems best.[4]
BATNAs may be determined for any negotiation situation, whether it be a relatively simple
task such as finding a job or a complex problem such as a heated environmental conflict or a
protracted ethnic conflict.
Fisher and Ury offer a job search as a basic example of how to determine a BATNA. If you
do not receive an attractive job offer by the end of the month from Company X, what will
you do? Inventing options is the first step to determining your BATNA. Should you take a
different job? Look in another city? Go back to school? If the offer you are waiting for is in
New York, but you had also considered Denver, then try to turn that other interest into a job
offer there, too. With a job offer on the table in Denver, you will be better equipped to assess
the New York offer when it is made. Lastly, you must choose your best alternative option in
case you do not reach an agreement with the New York company. Which of your realistic
options would you really want to pursue if you do not get the job offer in New York?
More complex situations require the consideration of a broader range of factors and
possibilities. For example, a community discovers that its water is being polluted by the
discharges of a nearby factory. Community leaders first attempt to negotiate a cleanup plan

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with the company, but the business refuses to voluntarily agree on a plan of action that the
community is satisfied with. In such a case, what are the community's options for trying to
resolve this situation?
They could possibly sue the business based on stipulations of the Clean Water Act.
They could contact the Environmental Protection Agency and see what sort of
authority that agency has over such a situation.
They could lobby the state legislature to develop and implement more stringent
regulations on polluting factories.
The community could wage a public education campaign and inform citizens of the
problem. Such education could lead voters to support more environmentally-minded
candidates in the future who would support new laws to correct problems like this
one.
In weighing these various alternatives to see which is "best," the community members must
consider a variety of factors.
Which is most affordable and feasible?
Which will have the most impact in the shortest amount of time?
If they succeed in closing down the plant, how many people will lose their jobs?
These types of questions must be answered for each alternative before a BATNA can be
determined in a complex environmental dispute such as this one.
BATNAs and the Other Side
At the same time you are determining your BATNA, you should also consider the
alternatives available to the other side. Sometimes they may be overly optimistic about what
their options are. The more you can learn about their options, the better prepared you will be
for negotiation. You will be able to develop a more realistic view of what the outcomes may
be and what offers are reasonable.
There are also a few things to keep in mind about revealing your BATNA to your adversary.
Although Fisher and Ury do not advise secrecy in their discussions of BATNAs, according to
McCarthy, "one should not reveal one's BATNA unless it is better than the other side thinks it
is."[5] But since you may not know what the other side thinks, you could reveal more than
you should. If your BATNA turns out to be worse than the opponent thinks it is, then

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revealing it will weaken your stance.
BATNAs and the Role of Third Parties
Third parties can help disputants accurately assess their BATNAs through reality testing and
costing. In reality testing, the third party helps clarify and ground each disputing party's
alternatives to agreement. S/he may do this by asking hard questions about the asserted
BATNA: "How could you do that? What would the outcome be? What would the other side
do? How do you know?" Or the third party may simply insert new information into the
discussion...illustrating that one side's assessment of its BATNA is likely incorrect. Costing is
a more general approach to the same process...it is a systematic effort to determine the costs
and benefits of all options. In so doing, parties will come to understand all their alternatives.
If this is done together and the parties agree on the assessment, this provides a strong basis
upon which to come up with a negotiated solution that is better than both sides' alternatives.
But if the sides cannot come to such an agreement, then negotiations will break down, and
both parties will pursue their BATNA instead of negotiation.

*Original publication date June 2003; reviewed and updated in July 2012 by Heidi Burgess.

[1] In 1992, Fisher and Ury published a 2
nd
Edition of Getting to Yes. The updated edition
was edited by Bruce Patton and incorporates Fisher and Ury's responses to criticisms of their
original 1981 book.
[2] Roger Fisher and William Ury. Getting to Yes: Negotiating Agreement Without Giving In.
(New York: Penguin Books, 1981), 104.
[3] I William Zartman, Ripe for Resolution, (New York: Oxford, 1985/1989)
[4] Roger Fisher and William Ury. Op.cit, 108.
[5] William McCarthy, "The Role of Power and Principle in Getting to Yes," in Negotiation
Theory and Practice, Eds. J. William Breslin and Jeffery Z. Rubin. (Cambridge: The Program
on Negotiation at Harvard Law School, 1991), 115-122.



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BATNA - Best Alternative
Having available options during a negotiation is a good alternative which empowers you with
the confidence to either reach a mutually satisfactory agreement, or walk away to a better
alternative.
"Don't put all your eggs in one basket." It's an old saying which has stood the test of time.
Some of you urbanites, sitting in your cubicles, may be scratching your heads and wondering,
'What in the name of Hades does this mean?' Meanwhile, back out there in the countryside, a
ruddy faced farmer, is likely rolling his eyes and patiently explaining, that should you trip on
the way back to the kitchen, eggs are no longer on the breakfast menu.
To a negotiator, this wise old proverb illustrates that if you bring only a single proposal to the
table, you may likely end up with a rotten deal, or no deal at all. You need to have an
alternative plan waiting in the wings.
It should be fairly obvious that not every negotiation is going to get tucked away in a nice,
neat settlement package. This is where BATNA comes to the rescue for those of you sensible
enough, to have heeded the sage advice of that old farmer who coined the above proverb
many ages ago.
BATNA means 'Best Alternative to a Negotiated Agreement'. This is your alternate plan
when the talks start to wobble out of control. It can also be your trump card to make the deal
happen to your advantage, or walk away from it altogether.
Let's illustrate BATNA by using a simple example. In the first scenario, let's say that you are
a buyer who goes to a supplier to purchase some badly needed parts to complete a project.
The supplier senses your urgency; his eyes begin to gleam with anticipation. You want the
lowest price possible while he wants the higher price. Oh! Oh! You have no fall-back
position. You're both in the boat, but it's the supplier who's holding the oars, so guess who
decides where the boat makes land?
On the other hand, say you go to the meeting prepared. Before arranging the meet, you set up
talks with 2 other suppliers who are ready and able to handle all your needs. When you meet
with the first supplier in this second scenario, you can calmly sit back in your chair, and
allow the supplier to finish his spiel. Now, watch the gleam fade from his eyes when you
spring the little titbit, about his competitors willingness to solve your problem. You have
BATNA! The talks suddenly become more amenable. So, who's holding the oars now?

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BATNA or NO BATNA? That is the Question
The power of your BATNA is a matter of scale. When you have a strong alternative solution
to a lousy proposal, you have leverage to build a more potent proposal. If not, then you can
turn to your best alternative solution. A strong BATNA is like a warm, fuzzy insurance
policy. A strong alternative provides you with two possibilities. Either you settle an
agreement with more favourable terms, or you have the option to simply say, 'No dea1!'
BATNA doesn't come in a package. It comes from planning and preparation. It is a two fold
process. First, you have to determine all your available options. Then, you must also
realistically estimate your counterpart's alternatives. Each is equally important. Otherwise, it
will be impossible to gauge the strength of your best alternative in relation to their best
alternative.
Your plan should be a flexible approach. It is important to keep in mind that both your
approach, and your alternatives, should be able to bend in the wind and weather the
unexpected storm. A negotiator may enter the talks with a preconceived idea of the best
alternatives available to both parties, but must not be bound by them.
Circumstances can alter rapidly. Unexpected changes can be anything from new information
on the table; a sudden rise in costs due to political upheaval; new legislation: or, even a
climatic intervention such as an unexpected and untimely frost. A sudden shift in conditions
can immediately affect the strength of either parties BATNA during the negotiation process.
What's in Your BATNA?
How do you determine your best alternatives to a negotiated agreement? First, you have to
dissect both your position and your interests. Then, look at the sum of these parts relative to
all the alternative options available. Pick the best option. Finally, do the reverse from your
counterparts perspective. A well prepared negotiator looks at the whole picture.
Some of the most crucial factors which should be considered include;
The cost - Ask yourself how much it will cost to make the deal relative to the cost of
your best alternative. Cost estimation may entail both the short term and the long
term. It boils down to figuring out which of your options is the most affordable.
Feasibility - Which option is the most feasible? Which one can you realistically apply
over all the rest of your available options?

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Impact - Which of your options will have the most immediate positive influence on
your current state of affairs?
Consequences - What do you think or estimate will happen as you consider each
option as a possible solution?
Mine Is Not Necessarily Bigger Than Yours!
Is that your ego showing? Put that thing away right now! After all the work you put into
estimating your BATNA, you might be feeling pretty smug. Studies have clearly shown that
it is an all 'too human' tendency to overestimate the strength of one's own BATNA,
while underestimating the strength of your counterpart's.
The underlying danger occurs at the point when one party reveals an over-estimated BATNA
too early in the talks. Having put all their cards on the table too soon, they call the other side.
Suddenly, they find that their big hand really equates to a pair of deuces facing a full house.
Kiss that pot goodbye!
The other side of the coin happens when you are absolutely certain that you have the stronger
BATNA. Let's suppose you know the other party needs to make a deal, and they have no
options available except to turn to your company. Now is the perfect time to put your own
powerful BATNA on the table. The BATNA you employ can act as a powerful leverage
while you decide whether or not to make the deal. As always, gauge the situation
accordingly. Timing can mean everything in determining when to put your BATNA on the
table.
Boosting Your BATNA
In the reverse situation, what can you do with a weak BATNA? Can your turn the tables?
Yes, there are two ways this might be accomplished. The first possibility is to strengthen your
own BATNA. The second way is to reduce the BATNA of your counterpart.
Be Creative - Simply ask yourself what other options you might employ that could
increase your bargaining position. Brainstorm the situation with all the key players in
your organization. Your planning must also factor in your counterpart's interests and
options.
Improve Your BATNA - Endeavour to expand your options. One possibility is to
consider bringing into the mix, other interested third party partners. A third
parties interests may coincide with key components of your interests, or of your

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counterpart's. For example, this might entail creative financing which presents a more
attractive option to your counterpart. If you weaken the other sides best alternative by
injecting another element into the mix, the game takes on a whole new slant.
Use Experts - Neutral parties with their own relevant expertise might be able to
unravel your problem into a newly designed, but more attractive perspective. If your
side lacks some area of expertise, get the experts to lend a hand.
Summary
Failing to have available options during a negotiation is simply unwise. Having a good
alternative empowers you with the confidence to either reach a mutually satisfactory
agreement, or walk away to a better alternative.
Do You Know Your BATNA?
For seasoned negotiation professionals, BATNA is a handy acronym for a method of getting
the upper hand in negotiations. BATNA, or Best Alternative To a Negotiated Agreement,
was coined in the best-selling book Getting to Yes: 2nd Edition (Fisher/Ury: Houghton
Mifflin, 1992). While the acronym is somewhat memorable, the common sense behind it is
undeniable. Yet, as is usually the case, common sense is not always common.

The BATNA is the standard against which any proposed agreement should be measured.
This standard is applicable when buying or selling a product, negotiating a salary, settling a
lawsuit, or selling your business, among other things. According to Fisher and Ury, this
method is preferable to having a bottom-line mentality in negotiation that establishes, in
advance, the least favorable positive outcome. From our experience, many business owners
default to the bottom-line mentality when selling their business, resulting in a less than
optimal outcome.

Negotiation Dangers
It is dangerous not to know your BATNA during negotiations. An unknown or
misunderstood BATNA may lead to undue optimism, or the inaccurate assumption of other
positive choices. This optimism may lead to the decision of walking away from a good offer
because of the assumption that better offers or alternatives are available, when actually they
are not.

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We regularly work with business owners who have received an unsolicited offer for their
business. Often this leads to one-on-one negotiation and in this scenario, the seller has only
one alternative if an agreement cannot be reached not to sell. As a result, owners can be
much too eager to reach an agreement to sell their company because they are not aware of or
have not developed other alternatives (i.e. other willing buyers or alternative strategies for
liquidity). Without good alternatives, the seller is in a position of weakness at the
negotiation table and its a good bet that the prospective buyer understands his advantage.

When we represent a client in the sale of their business, our job is to identify and create
alternative options, thus greatly strengthening the sellers negotiating position. We identify
and create these alternatives by finding multiple qualified buyers with a strong possibility of
interest in the company we represent. Through a comprehensive process of analysis,
marketing, and negotiation, we create a market for the subject company. This process will
either provide multiple alternatives for the seller (and lead to multiple offers) or, at the very
least, create the perception of multiple alternatives. In other words, a skilled transaction
advisor can create a market with just one willing buyer at the table by creating the perception
of multiple alternatives.

Mercer Capital was hired by a regional brick distributor after the owners were approached by
a large publicly traded brick manufacturer. To help determine if the offer was fair, the
owners requested an appraisal from Mercer Capital. However, rather than an appraisal, our
client needed representation to negotiate the transaction and we provided that representation.
In the negotiation, we developed sound arguments based on market information and
valuation-based principles to support a higher transaction price. Inherent in those arguments
was the fact that if our client did not receive a fair price for their business, they could get one
somewhere else. Our involvement in the process resulted in a 30% increase in the offering
price.

Negotiation Wisdom
The notion that those with wealth or size have the power in negotiations is a misconception.
Prospective buyers with wealth or size (say, a large pubic acquirer or private equity fund) can
be intimidating to some business owners, but in reality, the power lies with the side that has
the most alternatives and an accurate perception of those alternatives.

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It is also wise to understand the prospective buyers alternatives. As transaction advisors,
Mercer Capital researches the market for buyers and determines how to best position our
clients to be most attractive to potential suitors. We highlight our clients unique
characteristics, emphasizing assets or resources few other companies possess. Examples
include geographic location(s), distribution network, or intellectual property. If another
acquisition of this type is not available to the prospective buyer, then his alternatives are
limited, which weakens his negotiating position. Identifying and understanding the lack of
available alternatives for the other party is a powerful negotiation tool.

Understanding the buyers BATNA proved to be a big advantage in a recent transaction
where we represented the seller. Our client was a grain wholesale company. After
researching the market and gaining a complete understanding of the business, we recognized
the unique characteristics and resources in the business that would be valuable to a buyer.
The client had a geographic position that allowed for an early harvest and an abundant grain
supply. It also had a unique access to international waters and rail lines. Few, if any, other
companies in our clients market possessed these valuable characteristics, and thus buyers
were limited in their alternatives. When negotiating the transaction for the seller, we
highlighted these characteristics and resources and established a sense of limited options for
the buyer, resulting in a positive outcome for our client.

Should you disclose your BATNA? We believe a BATNA is almost akin to ones singing
voice; it should not be disclosed unless it is impressive. When negotiating the transaction
price of your business with multiple offers on the table, its advantageous to make the bidders
aware of the situation. On the other hand, if there are no other offers pending, its a good idea
to keep it to yourself.

Conclusion
As a business owner, having a realistic understanding of your best alternatives is crucial. It is
the responsibility of the transaction advisor to establish reasonable expectations for the
business owner. Selling a business with unrealistic expectations or a misunderstanding of
possible alternative buyers will waste time, money, and energy.

Mercer Capital has been identifying best alternative transaction strategies for clients for 25

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years. We believe that the easier it is for you to walk away from the negotiating table, the
more likely you are to get what you want. That is why it is crucial to know your BATNA. If
you are considering a significant corporate transaction, contact me or one of Mercer Capitals
transaction professionals in confidence to assist you.

Reprinted from Mercer Capital's Transaction Advisor, Vol. 10, No. 1, 2007.
Bargaining and Banter...I mean BATNA.
In bargaining situations, your BATNA (your best alternative to a negotiated agreement)
includes the alternatives a negotiator has outside the current negotiation e.g. "If I don't buy
your car, I can buy my Uncle's car for 2,000" (Thompson, 2005, pg 78). Related to this is
your target point and your resistance point. You should aim to discover this information from
the other party, but there are rarely situations in which you should disclose yours.

In a class exercise we were instructed to act out the sale of a car in pairs - one the buyer and
the other the seller. We were told that the car's market value was 5,000. In my pair, I took on
the role of the buyer. In order to identify my BATNA I created my reasons for buying the car.
I imagined that I was a car dealer buying the car for resale, so my best alternative to a
negotiated agreement would be to find another seller who would offer me a better deal. I set
my aspiration point at 3,000 and my resistance point at 4,500. I had to buy it for less than
its market value in order to make a profit.
Once
negotiations had begun, we both began to realise that our settlement rages did not overlap, so

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neither of us were willing to shift our resistance points. I later found that the seller had
decided not to sell the car for less that 4,700. If we had only been using distributive
negotiations, it is likely that we would have reached deadlock and no deal would have been
made.

However, we then strayed into integrative bargaining, which means that other resources are
brought into the equation. I disclosed the fact that it would cost me to clean the car and have
it serviced before resale. The seller then agreed to have the car cleaned before handing it
over. This shifted my resistance point slightly. I explained to the seller that I would be able to
pay for the car and take it off her hands as soon as it was ready. This shifted the seller's
reference point slightly. The seller then explained that the car has a new satellite navigation
system installed (which I knew to be worth a few hundred pounds) and that I could keep the
music system. This shifted my reference point a lot because I would be able to sell the car for
well over the market value with these extras. As a result, we finally agreed on 4,650.

My partner and I did what theorists would call 'expanding the pie'. The trigger was when we
began to share information with each other: "Negotiations would not go anywhere if
negotiatiors did not communicate their interests to the other party...[however]...A negotiator
should never ask the other party a question that he or she is not willing to answer truthfully"
(Thompson, 2005, pg 80). We shared some of our issues, but not our resistance points. Once
we discovered what issues were affecting the bargaining, we began to think of ways we could
help each other resolve them: "To capitalise on different strengths of preference, negotiators
need to compare and contrast issues and trade them off" (Thompson, 2005, pg 81).





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How to close a Negotiation successfully with
Zopa
Negotiation can at times be tricky. Though the principles of negotiation remain simple, the
biggest problem in negotiation arrives when the parties involved hit a dead end. You are
already familiar with talks like I have been working hard for you from past 2 years either
double my salary, or I quit!
The above statement is a pure dead-end. People are not ready to find out whether something
can work out between them. You can either term this as a lack of understanding other partys
priorities, or ego to concentrate only on what one can get back from the deal. Both the ways it
is not a win-win situation. A successful negotiation relies on the win-win principle which
comes from understanding all the negotiators involved. Here comes Zopa for the rescue!
What is ZOPA
Zopa stands for Zone of possible agreement. This is the zone in which both the negotiating
parties agree to each other. The phase in which they can be satisfied of what they have got.
Lets take an example. Lets say you are looking to buy a house, now as a buyer there will
always be an appropriate budget in your mind. And a price which would be the max you are
ready to pitch in. Assume that is 500,000. At the same time a seller (who has not disclosed
his amount to you) is looking forward to sell the house for 400,000 or above. Every seller
wants the best of what he can get from a deal. However there is always a minimum price he
sets.
If you are offered a house beyond 500,000 you simply walk away. If the seller is offered a
deal less than 400,000 she simply walks away.
Here the difference between the 2 values (500K-400K), the 100,000 is the Zopa. It is the zone
in which the deal can work out. Lets say the final amount is 450,000. If the both the
negotiators dont get another alternative (another buyer or seller). Or want to close the deal
asap; this amount fits well to their expectation.
Zopa is an essential part to every negotiation. If Zopa is not achieved in a negotiation, there
are chances that either of the negotiators will walk away from the deal. In case if you are a

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mediator in any conflict, or are assigned the task to negotiate on behalf of someone else, it is
very important for you to understand the ZOPA between the parties.
3 things you should consider for ZOPA.
1. The bigger the ZOPA, higher are the chances of the deal getting closed successfully.
2. Try to analyze the ZOPA but dont reveal your BATNA.
3. If at the first shot the offer is in your ZOPA, try negotiating further to sweeten the
deal rather than just accepting it as it is.
Can ZOPA be changed?
ZOPA might not be just what it seems to be prevalent. By analyzing the situation and
background of the counter party you might able to expand his ZOPA.
This can be pretty simple. In our example say the seller wants to sell the house over and
above 600,000. This amount falls beyond the ZOPA of this negotiation. To this, if the seller
can expand the buyers ZOPA the deal can still work out. If the seller can convince that the
cost is high because of factors like the locality, the ease of commuting and similar advantages
which he might not get in any other house there are chances that the buyer may relook his
bottom line. Same is applicable if the buyer works out to convince the seller.
Conclusion
So as we understand Negotiations always end happily in ZOPA. The next time you proceed
for any negotiation try to understand your requirement, brainstorm about what the other party
wants, and finally come up with the ZOPA that both negotiators agree to and close the
negotiation.







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Zone of Possible Agreement (ZOPA)
By
Brad Spangler
June 2003



What is a ZOPA and Why Does it Matter?
A "Zone of Possible Agreement" (ZOPA) exists if there is a potential agreement that would
benefit both sides more than their alternative options do. For example, if Fred wants to buy a
used car for $5,000 or less, and Mary wants to sell one for $4,500, those two have a ZOPA.
But if Mary will not go below $7,000 and Fred will not go above $5,000, they do not have a
zone of possible agreement.
The ZOPA is critical to the successful outcome of negotiation, but it may take some time to
determine whether a ZOPA exists. It may only become known once the parties explore their
various interests and options. If the disputants can identify the ZOPA, there is a good chance
that they will come to an agreement.
Foundations of ZOPA: BATNAs
In order for disputing parties to identify the ZOPA, they must first know their alternatives,
and thus their "bottom line" or "walk away position."
Alternatives: Parties must determine what alternatives they have to any agreement.

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Roger Fisher and William Ury introduced the concept of "BATNA" (Best Alternative
To a Negotiated Agreement). This is the best course of action that a party can pursue
if no agreement is reached.[1]
For example, Mary might have two potential buyers. Georgio is willing to pay $6,950. Mary
is now negotiating with Fred. If he will pay more than Georgio (Mary's BATNA), she'll sell
to him. If he won't pay that much, she'll sell to Georgio. Likewise, if Fred has found another
car he likes for $5,500, then he won't pay more for Mary's car than that...maybe even a bit
less. Fred's BATNA is $5,500.
Bottom Lines or Walk-Away Positions: BATNAs determine each side's bottom
lines. If you have an alternative car available for $5,000, $5,000 is your bottom line. If
you can sell your car for $7,000, that is your bottom line. If you don't do better than
that in the negotiation, you'll walk away.
So, a zone of possible agreement exists if there is an overlap between these walk away
positions. If there is not, negotiation is very unlikely to succeed. In fact, it will only succeed
if one party either realizes that his or her BATNA is not as good as he or she thought, or she
decides for some other reason to accept the agreement, even though an alternative option
might have yielded better results. (This often happens when parties do not explore or
understand their BATNAs well enough.)
Identifying the ZOPA
If both sides know their BATNAs and walk away positions, the parties should be able to
communicate, assess proposed agreements, and eventually identify the ZOPA. However,
parties often do not know their own BATNAs, and are even less likely to know the other
side's BATNA. Often parties may pretend they have a better alternative than they really do,
as good alternatives usually translate into more power in the negotiations. This is explained
more in the essay on BATNAs. The result of such deception, however, might be the apparent
absence of a ZOPA, when one actually did exist. Shared uncertainties may also affect the
parties' abilities to assess potential agreements because the parties may be unrealistically
optimistic or pessimistic about the possibility of agreement or the value of alternative
options.[2]
ZOPAs in Distributive and Integrative Negotiations
The nature of the ZOPA depends on the type of negotiation.[3] In a distributive negotiation,

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in which the participants are trying to divide a "fixed pie," it is more difficult to find mutually
acceptable solutions as both sides want to claim as much of the pie as possible. Distributive
negotiations over a single issue tend to be zero-sum -- there is a winner and a loser. There is
no overlap of interests between the parties; therefore, no mutually beneficial agreement is
possible.
For example, two people may be competing for one job. In the simplest case, there is no
ZOPA because both people want the full-time job and are not willing to divide the job
responsibilities and salary. One person must "win" and the other must "lose."
On the other hand, integrative negotiations involve creating value or "enlarging the pie." This
is possible when parties have shared interests or are dealing with multiple issues. In an
integrative negotiation, the parties can combine their interests to create joint value. To
achieve integration, negotiators can deal with multiple issues at the same time and make
trades between them. This is so that I might get more of something that I value while you get
more of something that you value. That way both parties can "win," even though neither gets
all that they originally thought they wanted. In the example above, if rewriting the job
description could create an additional job then the distributive negotiation would change into
an integrative negotiation between the employer and the two potential employees. If both
applicants are qualified, now they may both get jobs. The ZOPA, in this case, exists when
two jobs are created and each applicant prefers a different one of the two.

[1] Roger Fisher and William Ury, Getting to Yes (New York: Penguin Books, 1983).
[2] Michael Watkins and Susan Rosegrant, Breakthrough International Negotiation: How
Great Negotiators Transformed the World's Toughest Post-Cold War Conflicts (San
Francisco: Jossey-Bass Publishers, 2001), 26-28.
[3] Ibid, 29.
The Zone of Possible Agreement (ZOPA)

Zone of Possible Agreement ( ZOPA ) is the blue sky range where deals are made which both
parties to a negotiation find acceptable.


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ZOPA might almost sound like a foreign word for a cheer of joy, or maybe even a new and
exciting soft drink about to splash the marketplace. It's neither but if you have a wide ZOPA
in your negotiation, it's nearly as sweet.
Negotiation ZOPA stands for Zone of Possible Agreement. It's the blue sky range where
deals are made, that both parties to a negotiation find acceptable. Whether we're buying
something at a bustling yard sale, a country home, or entering into a complex business
venture, the Zone Of Possible Agreement is where an agreement is most likely to occur.
The process in finding this zone requires a little bit of detective work in order to make it
work. It begins with a proposal by a person, commercial entity or organization known as a
'Proponent'. Essentially, this is the person who puts an offer on the table. The receiving end
of a proposal is known as a 'Prospect'. This is the person or entity who considers the merits of
the offer or proposal. The prospect will accept the proposal, make a counter proposal/offer, or
outright reject it. This is where the game begins to get seriously fun.
The proponent is trying to sell us something. This can be a product, a business idea, services,
an organizational concept or a combination of these things. The proponent is more commonly
called the 'seller'. The prospect, on the other hand, is more commonly called the 'buyer'.
The seller wants to get the maximum amount possible for their proposal, but generally may
also set a limit for the least amount they will accept. The least amount they are willing to
accept, is known as the seller's 'Reservation Price'. This is the amount where they draw the
line, also know as the 'walk away' from the deal point.
The buyer, on the other hand, wants to pay the least amount possible, but may consider a
higher amount that they might be prepared to pay as well. The maximum amount they are
prepared to pay is also known as the buyer's 'Reservation Price' or 'walk away' from the deal
point.
The differences between these respective lows and highs of both the seller and buyer, are
their range of expectations. When you have a common ground or overlap between these two
different ranges, this is known as ZOPA or the Zone of Possible Agreement.
Of course, common sense dictates that if there is no overlap in the expectation ranges of the
seller and buyer, agreement becomes highly unlikely. Similarly, even where ZOPA exists, the
agreement might still not materialize,when the parties are unable to agree regardless. The
letter 'P' in ZOPA meaning a possible agreement, will more probably occur, but it's not a
definite.

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An illustration might make this clearer. Fiona intends to sell her business. She advertises her
business for 30,000, which is her highest expectation on what she has determined as the
optimum value, but will let it go for as low as 25,000, being her reservation price.
Gerald is interested, but he can only afford to pay 27,000 which is his Walk Away or
Reservation Price, and so he makes a tentative first negotiation offer of 24,000. Neither of
these negotiators know the Reservation Price or Walk Away positions of the other negotiator.
The overlap range or ZOPA lies between 25,000 and 27,000, which is the comfort area where
the two parties might be able to come to an agreement. Even if Fiona convinces Gerald to
enter her seller's range, she might still opt to hold out for a better offer from someone else.
The ideal piece of information, would be the other party's reservation price. It is
generally believed, that you should never reveal your own reservation price. The real trick is
trying to find that sweet range of ZOPA.
The Way to Negotiate? ZOPA!
Posted on 26 September 11 by Tom Disantis
Comment (3) Email
ZOPA is an acronym for Zone of Potential Agreementthis is the range in which a deal
can be closed that is mutually beneficial for both customer and supplier.
To illustrate a ZOPA by example (see Figure 1), lets say that a buyer is interested in a
particular vintage car that is offered by a private seller. The seller wants at least $20,000
(because of the price they paid plus all the maintenance they put into the car over the years).
The most the buyer is willing to spend on that car (because they can get a similar car from a
dealer) is $24,000.
So the ZOPA in this case is between $20,000 and $24,000, and hopefully buyer and seller can
agree to a price in between that each finds valuable.


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While this is a fairly straightforward example of a negotiation, in B2B sales, the ability to
negotiate effectively is a critical skilland understanding ZOPA is a key component of that.
This is the Taking Control skill among Challenger Reps building constructive tension
when (not if) the customer starts pushing back on price and other terms of the proposal or
contract.
How do Challengers do this? Not surprisingly, they prepare for the conversation by working
to understand the ZOPA with their customers.
Especially in more complex deals, there are potentially many things on the table to negotiate
with the customer beyond the price thats on the bottom line. There could be delivery terms,
financing arrangements, support requirements, and so on. Challengers leverage these
opportunities not only to determine the right price to offer, but also what types of tradeoffs,
beyond price, are available to negotiate.
In other words they dont seek to divide the pie with the customer. Instead they actively
seek ways to grow the pie bigger with the customer so that mutual value is created (beyond
the price on the bottom line of the contract).
When we profiled DuPont as a best practice for how they enabled their sales people to more
effectively Take Control with customers, a big part of their approach was identifying, in
advance of the conversation with the customer, elegant negotiables. These are tradeoffs
that can be made that are mutually beneficial to customer and supplier. That way, when
negotiating, DuPonts sales reps arent just thinking purely in terms of price, but rather the
value that can be created with a customer during the negotiation.
(SEC Members, learn how DuPont enabled their sales people to prepare for negotiations
with customers, and also read advice directly from the architect of the practice, Dan James.)
Is negotiating an innate skill? Many people think that skilled negotiators are born, not made
either you got it or you dont. However, like many things in sales, a reps success is
determined by how well he or she prepares, in advance, for a meeting with the customer.
What are some of the success stories you have seen with your high-performing sales people
when they negotiate with customers?