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reservation point

What is the Reservation Point in Negotiation?

The reservation point in a negotiation can help you reach better agreements with your counterpart.

The reservation point in negotiation is when the highest price at which someone is willing to buy an item is established, and the lowest price at which a seller will sell the item is confirmed, and the haggling that occurs between these two negotiators. It’s your point of indifference between accepting a deal and pursuing your BATNA, and an attempt at reconciling these two, often hidden, goals in negotiation. 

For example, if a job candidate would accept an offer between $70,000-$80,000 per year, and an organization is willing to pay between $65,000-$75,000, then a ZOPA of $70,000-$75,000 exists. (Issues other than price can and should be incorporated into the ZOPA as well, such as vacation time and work assignments.)

Of course, it’s not just haggling over prices. The reservation point can help in other negotiations, as well. 

How can you find that point? BATNA analysis helps you determine each party’s reservation point, or walk away point, in your negotiation. If there is a set of resolutions that both parties would prefer over the impasse, then a ZOPA exists, and it would be optimal for you to reach a settlement.

You can also use this information to decide whether it’s wise to make the first offer in a negotiation. You need to assess your best alternative to a negotiated agreement, or BATNA; your target; and your reservation point. Next, estimate your counterpart’s BATNA, target, and reservation point. This analysis will tell you how much you know about the zone of possible agreement, or ZOPA—the range of options that would be acceptable to both sides.

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The following items are tagged reservation point:

A Negotiation Preparation Checklist

Posted by & filed under Negotiation Skills.

Without a doubt, the biggest mistake that negotiators make—and one that many make routinely—is failing to thoroughly prepare. When you haven’t done the necessary analysis and research, you are highly likely to leave value on the table and even to be taken advantage of by your counterpart. A negotiation preparation checklist can help you avoid … Read A Negotiation Preparation Checklist

Price Anchoring 101

Posted by & filed under Negotiation Skills.

Opening offers have a strong effect in price negotiations. The first offer typically serves as an anchor that strongly influences the discussion that follows. In research documenting price anchoring, psychologists Daniel Kahneman and Amos Tversky found that even random numbers can have a dramatic impact on people’s subsequent judgments and decisions. … Read Price Anchoring 101

Reservation Point in Negotiation: Reach Negotiated Agreements by Asking the Right Questions

Posted by & filed under Negotiation Skills.

A reservation point negotiation is a bargaining scenario in which each side is trying to reconcile the other’s highest offer and the other’s lowest price. This negotiation example can apply to many other bargaining situations and demonstrates the value of open communication with your counterpart at the negotiation table. … Read More

How to Find the ZOPA in Business Negotiations

Posted by & filed under Business Negotiations.

In business negotiation, two polar-opposite errors are common: reaching agreement when it wouldn’t be wise to do so, and walking away from a mutually beneficial outcome. How can you avoid these pitfalls? Through careful preparation that includes an analysis of the zone of possible agreement, or ZOPA in business negotiations. … Read How to Find the ZOPA in Business Negotiations

What is Distributive Negotiation and Five Proven Strategies

Posted by & filed under Dealmaking.

Most negotiations call for very different, even opposing, skills: collaboration and competition. To get a great deal, we typically must work with others to find new sources of value while also competing with them to claim as much of that value for ourselves. Before mastering the intricacies of value creation in negotiation, it helps to … Read More

Should Salary Expectations Be a Laughing Matter?

Posted by & filed under Business Negotiations.

In salary negotiations, job candidates are often at a disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into the discussion tends to strongly influence the salary expectations. Unfortunately for candidates, the first figure mentioned in a negotiation often is not in their favor. … Read Should Salary Expectations Be a Laughing Matter?

Business Skills: Make Concessions Strategically in Negotiation

Posted by & filed under Business Negotiations.

Business negotiators generally understand that to get what they want from another party or parties, they will have to give something away. But what concessions should you offer in the deal-making process, and what form should they take? New research on concession making in negotiation offers tips to add to your repertoire of business skills. Finding … Read More

How to Bargain Salary: Laughing Matters?

Posted by & filed under Salary Negotiations.

As they contemplate how to bargain salary, job candidates are often at a disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into a negotiation tends to strongly influence the final outcome. Unfortunately for candidates, the wage or wage range that employers give in a job listing or … Read How to Bargain Salary: Laughing Matters?

Compensation Negotiation Tips for Salary Bargaining

Posted by & filed under Salary Negotiations.

Job candidates are often eager for compensation negotiation tips, and with good reason: they tend to be at a bargaining disadvantage relative to the hiring organization. Due to the well-documented anchoring effect, the first figure introduced into the discussion can strongly influence the final outcome—and the wage or wage range cited by employers is likely … Read More

Arbitration vs Mediation: Using Teambuilding and ADR in Negotiation

Posted by & filed under Mediation.

During his years as George H.W. Bush’s Secretary of State, one of James A. Baker, III’s, goals was to encourage the free-market reforms that Communist Party of the Soviet Union General Secretary Mikhail Gorbachev had launched in the late 1980s. One day during his tenure, a high-level Bush administration official commented in the press that … Read More

In Platform Negotiations with Clinton, Sanders Was Victorious

Posted by & filed under BATNA.

With the 2016 Democratic National Convention now over, Vermont senator Bernie Sanders used the Hillary Clinton campaign’s fear of a divisive spectacle in Philadelphia to extract concessions on the party’s official platform and committee assignments. The senator’s tough dealmaking suggests an important negotiation lesson: Always know your BATNA and ZOPA in any negotiation. … Read More

Get Ready for Team Talks

Posted by & filed under Daily, Mediation.

Adapted from “Strength in Numbers: Negotiating as a Team,” by Elizabeth A. Mannix (professor, Cornell University), first published in the Negotiation newsletter, May 2005. The widespread belief in “strength in numbers” suggests that having more players on your team should be a benefit, not a burden. But this belief can lead team members to underprepare … Read Get Ready for Team Talks