Best Alternative To A Negotiated Agreement (Batna) Concept

Contracting parties can adapt BATNAs to any situation that requires negotiations, from discussions on wage increases to resolving more complex situations such as mergers. BATNas are essential to negotiation because a party cannot make an informed decision on whether to accept an agreement unless it understands its alternatives. Although a BATNA is not always easy to identify, Harvard researchers have outlined several steps to clarify the process: your BATNA is the only standard that can protect you both from accepting unfavorable terms and from rejecting terms that would be in your best interest to accept them. [2] In the simplest sense, if the proposed agreement is better than your BATNA, then you should accept it. If the agreement is no better than your BATNA, then you should resume negotiations. If you are unable to improve the agreement, you should at least consider withdrawing from the negotiations and following your alternative (although the costs are also taken into account). Here is a process developed by Harvard Law School to develop the best alternative to a negotiated agreement: BATNA and EATNA also influence what William Zartman and others have called “maturity,” the time when a dispute is ready or “ripe” for a settlement. [3] If the parties have ideas or “congruous images” about BATNs, then negotiations are ripe to reach an agreement. The images of Kongruent-BATNA have ensured that both parties have similar views on how a dispute will be possible if they do not agree, but instead pursue their other rights-based or power-based options. In this situation, it is often wiser for them to negotiate an agreement without continuing the dispute process and thus reduce transaction costs.

This occurs when parties involved in a dispute engage in an out-of-court settlement (which happens in the United States about 90 percent of the time). The reason the parties agree is that their lawyers have understood the understanding of the strength of the case of both parties and the likelihood that each party will be able to impose themselves in court. They can then “go hunting” and achieve the same result through negotiations much easier, faster and at a lower cost. Company A, for example, makes a US$20 million takeover bid to Company B. Nevertheless, Company B thinks they are worth $30 million in valuation. Company B quickly declined the offer. However, what Company B has not taken into account is increasing competition in the sector and stricter rules, all of which will limit growth in the coming year and reduce its valuation. If Company B had taken the time to include these factors in the current assessment and had clearly followed the four batna steps, including #2, assessing the alternative to staying the course in a challenging business environment, management could have been persuaded to accept it. The best alternative to a negotiated agreement (BATNA) is the approach that a party to the negotiations will take if the talks fail and no agreement can be reached.