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
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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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