The fundamentals
BATNA, ZOPA and reservation price: the geometry of a negotiation
Before the first offer, a negotiation already has a geometry. Three markers determine your margin, your real power, and the threshold beyond which walking away beats signing.
The three markers
What you will do if no deal is reached. This is your real power: the stronger your fallback, the less you depend on this agreement.
The limit beyond which walking away beats signing. It follows directly from your BATNA: it is the price of your best alternative.
The gap between the two sides' reservation prices. If it exists, a deal is possible; if it is empty, no reasonable deal is.
What it changes in practice
Improving your BATNA raises your power without saying a word at the table. Knowing your reservation price protects you from a bad deal signed under pressure. Estimating the ZOPA tells you whether there is anything to negotiate, and where to place your first offer. These markers are prepared before, never in the heat of the exchange.
Sources
- Roger Fisher and William Ury, Getting to Yes (1981), which popularised the notion of BATNA.
- Howard Raiffa, The Art and Science of Negotiation (1982), on the zone of agreement and decision analysis.