Negotiation research you can use: The irrational impact of disappearing BATNAs

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In negotiation, a strong best alternative to a negotiated agreement, or BATNA, is generally regarded as our best source of power. When we know we can walk away and get a great deal elsewhere, we’ll insist on an even better agreement at our current bargaining table. Our BATNA powerfully anchors our targets, first offers, and the deal we ultimately reach, research shows.

But what happens when a BATNA falls through? Imagine a job offer being revoked because you took too long to decide, or a house being swept out from under you. Rationally speaking, you’re now in the same bargaining position as someone who never had a viable BATNA, and that lost BATNA shouldn’t influence how you negotiate going forward. But in a new study, London Business School researchers Garrett L. Brady, M. Ena Inesi, and Thomas Mussweiler find that negotiators don’t sufficiently adjust to their changed circumstances after losing a BATNA.

Motivated by a nonexistent alternative

In their first study, the researchers asked participants in the United Kingdom to imagine they were selling their car, valued at £10,100, and were on their way to negotiate with an interested buyer, Taylor. Some participants were told they had received a nonnegotiable offer of £12,706 from another potential buyer, Brad, the week before. Others were not informed that they had a BATNA.

All participants then wrote down how they would approach the negotiation with Taylor. Next, those who had a BATNA from Brad were informed that he had called to say he no longer wanted the car. All participants were then asked how much they wanted from Taylor and how much they’d ask for. Those who had lost their BATNA, as compared to those who had no clear BATNA, said they would set higher aspirations and make more aggressive first offers. In other experiments, participants who’d been told about a BATNA they’d had and lost also set higher aspirations and negotiated better prices than those who weren’t told about a BATNA.

Toward more rational decisions

Although lost BATNAs were linked to superior performance in the negotiation scenarios studied, the researchers caution that the loss of a BATNA could also have the opposite effect. Given that poor BATNAs tend to harm negotiator performance, for example, the effects of a bad alternative could linger after it’s gone.

Moreover, Brady and colleagues also found that, despite their superior performance, negotiators who’d lost a BATNA were less satisfied with their results than those who didn’t have a defined BATNA. It’s a reminder that negotiator performance and satisfaction don’t always go hand in hand.

The main takeaway from the study is that we are all susceptible to anchoring irrationally on our BATNA—even when it’s gone. Because we can’t be certain whether this irrationality will help us or hurt us, we should strive to reach more logical judgments and decisions.

The researchers identified one effective strategy for doing so, known as “consider the opposite.” They asked participants in one experiment to generate reasons that they might be overvaluing their BATNA. After these participants learned that the BATNA had been withdrawn, they were better at moving beyond it and reaching more reality-based targets, first offers, and outcomes in another negotiation.

Source: “The Power of Lost Alternatives in Negotiations,” by Garrett L. Brady, M. Ena Inesi, and Thomas Mussweiler. Organizational Behavior and Human Decision Processes, 2021.

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