Preparing for Negotiation in Mediation: Identifying Alternatives (BATNA)

January 30, 2024

 Preparing for negotiation in mediation requires thorough consideration of alternatives to increase the likelihood of a successful resolution. To properly formulate and evaluate competing settlement proposals offered during the mediation it is critical to rigorously examine possible alternative proposals and options before the mediation begins.

Before negotiations, parties and their counsel should consider:

1. The Best Alternative to a Negotiated Agreement (what mediators and negotiators commonly refer to as the party’s “BATNA”);
2. The worst deal they are willing to accept (“reservation point”);
3. The other side’s BATNA.

Knowing one’s BATNA is essential for informed decision-making. Without it, parties risk accepting an offer worse than their alternatives or rejecting a better one. A BATNA clarifies at what point it makes sense to walk away from an unsatisfactory agreement and to understand the consequences of not reaching a resolution. Clients and their counsel need to think about the consequences of not resolving the conflict because it affects the choices they make during negotiation.

Once parties know their BATNA, they can assess whether their reservation point is reasonably aligned with their BATNA. While setting a reservation point is necessary to avoid a bad deal, parties should make sure to consider their realistic alternatives when determining their reservation points. In other words, if the goal of a negotiation is to put oneself in a better position than one’s alternatives, then a reservation point should be slightly better than one’s BATNA. Consequently, parties should avoid setting reservation points too high, as it may lead to rejecting offers better than any alternative outside the deal.

Clients and their counsel should also consider the other side’s BATNA for two reasons: (1) to assess the parties’ relative negotiation power and flexibility, and (2) to estimate realistic settlement ranges. A party may have less power if the other side’s BATNA is superior, and vice versa. Parties often fail to assess power accurately, leading to negotiation pitfalls (e.g., rejecting offers better than any alternative, or accepting offers worse than their alternative). Even before the mediation, the parties and their counsel should spend time realistically assessing their relative power so that they can make sound strategic decisions at the mediation during negotiations.

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