Reservation prices, resistance points, and BATNAs

In Theory
Reservation Prices, Resistance Points, and
BATNAs: Determining the Parameters
of Acceptable Negotiated Outcomes
Sally Blount White a n d Margaret A. Neale
During the 1980s, bargaining and negotiation garnered considerable attention
from researchers and practitioners in a number of different academic disciplines
and professions. Much of the research and writing was directed toward improving the effectiveness of negotiators through case studies, theory development,
and empirical research. Because a n u m b e r o f authors addressed this issue, o n e
resulting difficulty is frequent confusion a m o n g other writers and their students in the translation o f theoretical and empirical concepts. One particular
source of confusion is the distinction a m o n g reservation prices (Raiffa, 1982),
resistance points (Walton and McKersie, 1965), and BATNAs (Fisher and Ury,
1981). The terms are often used interchangeably by negotiation scholars, and
o n the surface, they seem very similar. They all represent the notion o f a lower
bound, beyond which the negotiator will not settle. For negotiators in a selling
role, that b o u n d translates into the lowest price that is acceptable. For negotiators in a buying role, it represents the highest price that is acceptable. In this
article, we argue that, in fact, the concepts are different and that they represent
three separate lower bound points that are salient to the focal negotiator at different points in the negotiation. As a starting point, we turn to the original attthors
of each of these terms for definitions and examples.
Background
Resistance point. Research in industrial relations arid collective bargaining has provided many- o f the theoretical underpinnings and perspectives for
current negotiation theory and research. A fundamental c o n c e p t taken f r o m
this paradigm is the contract zone m o d e l p r o p o s e d by Walton and McKersie
(1965). In this model, each party in a negotiation has an aspiration zone o f
outcomes within which the final settlement, if" settlement is reached, will fall.
A party's range of acceptable outcomes is typically depicted along a unidimenS a l l y B l o u n t W h i t e is a n e g o t i a t i o n s i n s t r u c t o r a n d doctoral c a n d i d a t e at t h e Kellogg G r a d u ate School o f M a n a g e m e n t , N o r t h w e s t e r n University, Evanston, Ill., 60208. M a r g a r e t A. N e a l e
is t h e Helen a n d J. L. Kellogg D i s t i n g n i s h e d P r o f e s s o r o f D i s p u t e R e s o l u t i o n a n d O r g a n i z a t i o n s
at t h e Kellogg School.
0748-4526/91/1000-037956.50/0 © 1991 Plenum PublistlingCorporation
Negotiation Journal
October 1.991 379
sionat scale. According to Walton and McKersie (1965), the extremes of the range
are b o u n d e d by the party's resistance point, the least favorable o u t c o m e that
is needed to satisfy one's constituency, and by the party's target, the best outcome that can be expected. The overlap of the various parties' ranges of acceptable agreements constitute the contract zone.
Within this context, the resistance point is often viewed as the most salient
aspect. It determines if impasse will occur. By definition, parties will not enter
into agreements that fall below their least acceptable outcomes. Alternatively, if
a party's target is exceeded, the patty should always agree to the proposal. Walton and McKersie (1965) describe three factors that influence the location o f the
resistance point: (1) the lowest subjective utility est'tmate o f what is required by
the negotiator's constituency; (2) the most pessimistic assumption about what
is possible relative to the other side's objectives; and (3) the least favorable assumptions about the negotiator's bargaJl~ng skill relative to the negotiating opponent.
BATNA. In the 1970s, negotiation theorists began to address a broader class
o f situations than that o f collective bargaining. Because buyers and sellers in
most two-party negotiations can choose their negotiating partners from a broad
range of potential bargainers, researchers began to look at situations w h e r e alternative negotiated agreements could be pursued in the event o f impasse. Thus,
w h e n Fisher and Ury (1981) wrote their ground-breaking b o o k o n negotiation,
they emphasized the importance o f the negotiator's BATNA (Best Alternative
To a Negotiated Agreement) in preparing for a negotiation. The key idea o f
calculating one's BATNA is to determine, before entering a negotiation, w h a t
is the best outcome that the negotiator can h o p e for if the current negotiation
results in impasse. In the case o f a job negotiation, it may represent an alternative job offer. In buying a house, it could be an estimate of what a reasonable
bid would be o n another house that interests you. A BATNA can also change
over time. For example, as the seller of a house, the lowest price that you will
accept today, given prevailing market conditions and what you paid for the
house, might be higher than what you w o u l d be willing to accept t w o m o n t h s
from n o w after placing a successful bid o n y o u r next home. In one-of-a-kind
negotiations, such as for the sale o f a valuable painting or vase, a BATNA may
simply represent an alternative investment option for your money. Fisher and
Ury (1981: 104, 111) write that the BATNA is " t h e standard against w h i c h any
proposed agreement should be measured" and that developing y o u r BATNA
"enables you to determine what is a minimally acceptable agreement."
Reservation price. Shortly after Fisher and Ury's (1981) publication, Raiffa
(i982) wrote a b o o k that offered a m o r e analytical framework for conceptualizing negotiations, one that built off the framework that Xgralton and McKersie (1965) had introduced for collective bargaining. W h e n Raiffa (1982)
transferred the contract zone model to a broader class o f negotiations, h e
replaced the concept o f a resistance point with that o f a reservation price.~ A
party's reservation price represents his or her m i n i m u m or m a x i m u m acceptable settlement price within the current negotiation, depending o n w h e t h e r the
negotiator is a seller or buyer, respectively. To describe h o w the reservation
price is determined, Raiffa (1982: 46) states:
In the abstraction...each bargainer knows his or her resezwafion price,
but has only probabilistic information about the other party's reset380
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ration price. Very often in practice the parties have but an imprecise
feel for their own reservation price and make no formal attempt to
assess a probability distribution of the other party's reservation price.
Further, he asserts that a negotiator's reservation price is influenced b y his o r
her BATNA, but does not explicate the relationship b e t w e e n BATNAs and reservation prices.
Raiffa (1982) defines the zone of agreement as the area b e t w e e n the parties' reservation prices. In the reservation price model, the likelihood o f settlement within the current negotiation is d e p e n d e n t u p o n the degree to w h i c h
the parties' reservation prices overlap. If there is large overlap, the probability
of settlement is high, although not guaranteed (Myerson and Satterthwaite, 1983).
If there is little or no overlap, the probability o f settlement is low.
Synthesis. From these b a c k g r o u n d summaries, it is clear that the BATNA,
reservation price, and resistance point are very similar constructs. T h e y e a c h
represent the notion o f a lower bound, b e l o w w h i c h the negotiator will n o t
settle. A BATNA or reservation price represents a lower b o u n d that is defined
relative to the environment surrounding the negotiation (e.g., the prevailing
market or alternative investments). A resistance point represents a lower b o u n d ,
which is influenced by m o r e subjective calculations within the negotiation (e.g.,
perceptions o f b o t h parties' expectations and assumptions about relative bargaining skills). On the surface, the BATNA and the reservation price s e e m m o s t
similar. Thus, in sorting out these concepts, the first question is: W h y should
the negotiator not set a reservation price that is simply equal to his or her
BATNA? We argue in the next section that in m o s t cases they should not be equal.
Reservation
Prices versus BATNAs
Once a negotiator has entered into a bargaining situation, a value in reaching
agreement clearly exists. If n o settlement is reached, the time a n d energy
e x p e n d e d to complete the negotiation b e c o m e net losses. A negotiator should,
therefore, prefer to complete the current transaction rather than e n d in impasse
as long as the settlement price c o m e s within s o m e estimated transaction cost
of his or her BATNA. This transaction cost equals the value the negotiator places
on the time and energy that he or she w o u l d have to e x p e n d to find a n o t h e r
negotiator or to enact s o m e guaranteed alternative outcome. Thus, f r o m a strict
cost-benefit viewpoint, negotiators could "rationally" c h o o s e to accept outcomes that fall below their BATNAs in the f o r m o f a transaction-cost-adjusted
value. It is this value that the "rational" negotiator should take into the negotiation and below which he or she should not settle. W h a t this reasoning suggests is that b o t h the BATNA and the reservation price are quantities that are
fixed o n c e the negotiator enters into a negotiation, and the reservation p r i c e
should be equal to the negotiator's BATNA plus or minus an estimated transaction cost, depending u p o n w h e t h e r the negotiator is in a buying o r selling role,
respectively. 2 It is at his or her reservation price that the negotiator is truly
indifferent between enacting that o u t c o m e and pursuing his or her best alternative agreement.
With this clarification in hand, the next question is: In negotiations characterized by the presence o f alternative agreements, is the resistance p o i n t relevant as a construct separate f r o m the reservation price? Data in the following
section suggest that, in fact, they are different. In practice, the p r e s e n c e o f a
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concrete limit o n what negotiators " s h o u l d " accept, if seeking to maximize
absolute outcomes, is not the only factor that seems to influence the negotiator's lower b o u n d in actual negotiations.
S o m e P u z z l i n g Empirical F i n d i n g s
Pinkley, Neale, and Bennett (in press) recently c o n d u c t e d a study to test the
extent to w h i c h BATNA levels influence negotiated outcomes. T h e y used a
two-party negotiation that required integrative problem solving. T h e y assigned
subjects explicit BATNAs, w h i c h were c o n v e y e d in terms o f points that subjects w o u l d be awarded if they c o u l d not reach settlement w i t h their negotiation o p p o n e n t . (Thus, in this case, the BATNAs were set to equal the
reservation prices, given negligible transaction costs.) These BATNA levels were
varied. It was easier for negotiators w i t h low BATNAs to earn m o r e p o i n t s
through settlement than impasse and harder for negotiators with high BATNAs.
The results s h o w e d that BATNA levels t e n d e d to influence final settlements.
However, they also s h o w e d that a substantial p o r t i o n o f subjects w i t h high
BATNAs settled at prices b e l o w their BATNAs. This c h o i c e m e a n t that these
subjects preferred settling and obtaining fewer points over declaring impasse
and accepting m o r e points.
Bazerman, Neale, Valley, Kim, and Zajac (in press) recently f o u n d a different result. In their study, several subjects preferred impasse w i t h zero r e t u r n
(i.e., a BATNA of zero) to settling at an agreement that yielded small, positive
returns. This study involved a distributive negotiation over the sale o f a
house. Buyers were told that their o u t c o m e in the negotiation was equal
to the difference b e t w e e n the final settlement price and $230,000, their
assigned reservation price. In o n e condition, as m a n y as 11 out o f 88 negotiations resulted in impasse in the presence o f a relatively large bargaining
zone. In this case, the negotiators c h o s e a return o f zero points over a positive negotiated settlement.
Resistance Points v e r s u s R e s e r v a t i o n Prices
Together, the above findings suggest that while BATNAs and reservation prices
are prescriptive instruments that negotiators should identify ahead o f time and
use, other factors within the negotiation influence actual behavior. If we return
to Walton and McKersie (1965), their resistance point concept explicitly incorporates the notion of subjective utility and takes other interactive a.\pects within
the negotiation into account (e.g., assumptions about the o p p o n e n t ' s bargaining skills). The findings o f the previous section indicate that negotiators may,
in fact, often retranslate explicit reservation prices into perceived resistance
points, and it is these resistance points that negotiators act u p o n in actual negotiations. These resistance points may be based u p o n explicit reservation prices,
but other factors within the negotiation b e c o m e important as well.
To make this distinction clear, consider the following example: Pat budgets
to spend $200 o n a new suit and then goes out to the store. Pat tells the salesperson that he is looking for a new suit and w o u l d like to spend n o m o r e than
$200. Thirty minutes later, Pat walks out having spent $250. Obviously, Pat
was influenced by more than his budget w h e n he decided to buy the suit. Thus,
an interesting question for inquiry is: What factors within a two-party negotiation influence the distance a n d direction between a negotiator's reservation
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price (in this example, Pat's budget; in the earlier examples, the negotiator's
BATNA) and the resistance point u p o n which the negotiator bases his or her
final actions?
The P~gblem with Dollars. The theoretical distinction that we are trying
to draw here between reservation prices and resistance points parallels the distinction between outcomes and utilities that economists consider. T h e y assume
that decision makers can translate actual outcomes into perceived units o f utility. They then base their analyses u p o n these units o f utility. Within this framework, the reservation price represents a pure o u t c o m e measure (i.e., dollars,
points, etc.). The resistance point adds utility concerns to this measure.
In practice, the resistance point/reservation price distinction is difficult to
untangle for the behavioral researcher, as well as for the practitioner. First, the
negotiator may not k n o w his or her reservation price. Often, it is only a vague
sense of what alternative negotiations might yield or some targeted range o f
outcomes (e.g., "i'd like to get $40 to $50 for my bicycle." ). Second, even if
the negotiator does have an explicit reservation price, the negotiator still has
to translate any utility concerns into units u p o n which he or she can a c t - - t h a t
means that they have to be turned back into dollars.
As a consequence, w h e n a negotiator identifies a reservation price (or o n e
is assigned, as in the lab), there may be n o way o f telling, a priori, w h e r e the
negotiator's resistance point is located relative to his o r her reservation price.
One can gain evidence of its location only w h e n the limit imposed by the reservation price is violated--as in the Pinkley, Neale, and Bennett (in press) study,
w h e n some negotiators rejected their explicit BKFNAs and instead chose lesser~alued, negotiated outcomes. However, this p h e n o m e n o n is infrequent. In the
presence o f a moderately sized, positive bargaining zone between t w o parties,
most settlements will fall o n the expected side o f the reservation price. Any
variation may be easily rationalized as negotiator error. Thus, negotiation practitioners and researchers may easily overlook the distinction b e t w e e n reservation prices and perceived resistance points.
The Social Interaction
in Determining
Resistance
Points
Thus far, we have argued that the resistance point is an estimate o f subjective
utility, and it is this point u p o n w h i c h the negotiator bases his or her actions.
In this section, we go o n to suggest that, while a negotiator may be capable
o f calculating his or her BATNA and reservation price objectively, the same
negotiator can fall victim to social cognitive biases that pervade the negotiation interaction w h e n determining his o r her resistance point. Just as m a n y
researchers (e.g., Neale and Bazerman, 1991) have demonstrated that individual
cognitive biases are likely to influence the individual negotiator's performance,
we contend that social cognitive biases also affect the negotiation interaction.
In this sense, the relationship between a negotiator's resistance p o i n t and his
or her explicit reservation price is influenced by the social interchange within
the bargaining situation. 3 Further, because o f its inherently interactive nature,
the social interchange is affected by social cognitive biases. We present this algument by exploring psychological mechanisms that could explain w h y negotiators might choose either o f two types o f setdements that would appear irrational
within a strict profit maximization framework. Such irrational settlements would
include a negotiated outcome that results in lower returns than one's reservaNegotiation Journal
October 1991
383
tion price or the choice to remain at impasse and accept zero return over the
choice to settle and accept a positive return.
The Choice to Settle B e l o w One's Reservation Price. T h e social cognitive
literature suggests there might be a psychological cost o f uncertainty that negotiators will seek to minimize and m a y lead negotiators to settle b e l o w "rationally" calculated reservation prices. This psychological cost is derived f r o m the
individual's need for structure. Kruglanski and Freund (1983) write:
The need for structure is the need to have some knowledge on a given
topic, any knowledge as opposed to confusion and ambiguity. A need
for structure once aroused is assumed to have an inhibiting or freezing influence on the hypothesis-generation process because the generation of alternative hypotheses endangers the existing hypothesis or
structure... Indeed, research evidence indicates that time pressure
and the need to quickly reach a decision intensify the tendency to
seek cognitive closure and to refrain from critical probing of a given
seemingly adequate solution to a problem.
Thus, the need for structure might lead individuals to focus o n l y o n the
current negotiation and accept an o u t c o m e that they might not accept if they
were considering the outcome from an internegotiation vantage point. For exampie, imagine the buyer of a house w h o becomes so focused u p o n reaching agreem e n t with the seller o f a particular house that the buyer loses sight o f the fact
that there m a y be better values available o n the m a r k e t and ends up overpaying for the property. " I k n o w that I paid a lot for the house," the b u y e r might
rationalize, " b u t I wanted a house just like that one, and I did not k n o w if I
would ever find another one." The individual's psychological n e e d for structure could also explain a seller's willingness to accept little or n o profit over
the uncertainty o f impasse. Many o f us have heard friends w h o have sold used
cars say, "I k n o w that I could probably get m o r e f r o m a n o t h e r buyer, but I
just wanted to get it sold!" Thus, the n e e d for structure m a y often lead to an
irrationally strong desire for settlement.
Once a negotiator has entered into bargaining with a strong desire for set°
tlement, he or she may then choose behaviors in the belief that these behaviors
are those desired by the other p a r t y in order for settlement to occur. Social
psychologists refer to this as a process of expectancy confirmation. Expectancy
confirmation is often linked to the idea o f a serf-fulfilling prophecy. Darley and
Fazio (1980: 869), in writing about expectancy confirmation, assert that " the
perceiver's expectation, c o m m u n i c a t e d through his or her action, can actually
alter the behavior of the target in such a way that observers judge the behavior
to be in accordance with the definition implicit in the perceiver's expectancy."
Thus, the process o f expectancy conf'trmation suggests that negotiators w h o
strongly desire settlement may, in fact, adjust their behaviors to m a k e settlement occur. These negotiators may seek to act in accordance with the perceiver's
(i.e., the other negotiator w h o is less c o m m i t t e d to settlement) expectations.
For example, our friend selling the used car might have m a d e a p r e m a t u r e concession o n price because he thought that w h e n the b u y e r did n o t r e s p o n d to
his first offer, the buyer was uninterested, rather than simply reticent and
thoughtful. In this sense, the n e e d for structure enacted through expectancy
confirmation offers o n e explanation for w h y a negotiator m a y c h o o s e to settle
below his or her reservation price.
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The Choice to Accept I m p a s s e over a Positive-Valued Settlement. As ahxrady
discussed, both transactional and psychological incentives exist that motivate
negotiators to settle within the current negotiation. In the presence o f a positive bargaining zone, why, then, would negotiators ever knowingly c h o o s e
impasse over settlement? One simple explanation is that they may not realize
that a positive bargaining zone exists. Myerson and Satterthwaite (1983) have
proven mathematically that there is "rational" cause for some negotiators to
choose impasse based u p o n a probabilistic assessment o f the " t r u e value" the
opponent places o n the good being negotiated. This analysis assumes that each
negotiator knows his or her o w n "true value" o f the good and that value is
unchanging (i.e., not influenced by other events that may transpire). W h e t h e r
these assumptions are correct may d e p e n d u p o n the actual negotiation situation. However, adding the uncertainty of not fully knowing one's o w n reservation price to the other assumptions o f their m o d e l would further increase the
probability- that the two negotiators might fail to locate a mutually agreeable
settlement.
While this explanation highlights an important structural aspect o f impasse,
a s e c o n d - - a n d perhaps m o r e interesting perspective from a behavioral
viewpoint--is the notion that impasse may result because one or m o r e parties
knowingly chooses not to settle, even in the presence o f positive settlement
gains. A number of researchers studying ultimatum bargaim'ng games (e.g., Guth,
Schmittberger, and Schwarze, 1982) have found that many individuals will
choose an impasse w h e n they perceive that their o p p o n e n t will get a m u c h
better deal than they will. These authors suggest that this behavior is tile result
of a violation of a perceived fairness n o r m o f equity or equality. Further, the
work of Loewenstein, ]Taompson, and Bazerman (1989) suggests that individuals
place lower utilities on the settlement of disputes w h e n they perceive that the
o p p o n e n t will get more o f the available resources than they will. As the
imbalance becomes greater, the disutility o f settlement (or the attractiveness
o f impasse) becomes greater. This effect is heightened w h e n the negotiators
do not like the other party. Taken together, the works just cited imply that
individuals dislike perceived inequities within bargaining situations. W h e n excessive perceived inequity exists, individuals w h o place especially large amounts
of disutility o n inequity may c h o o s e impasse over a positive outcome. The
thought process may be, " I f I c h o o s e impasse, at least we both obtain the same
outcome--nothing!"
With this theoretical argument in mind, we return to Walton and McKersie's (1965) concept of an aspiration zone. Here, in addition to the resistance
point, they also identify a target. The target is the best possible o u t c o m e that
the negotiator can reasonably expect. We believe that Raiffa's (1982) approach
underemphasizes the actual role o f targets in the negotiator's evaluative processes
and argue that negotiators probably d o think in terms o f ranges rather than
point estimates. For example, "I'd like to get $50 for my bike, but if I have
to, I'll settle at $40." Within this context, the target (in this case, $50) is just
as important an anchor for the negotiator, if not m o r e so, than the reservation
price ($40). The literature o n cognitive anchoring (see Kahneman, Slovic, and
Tversky, 1982) argues that individuals will adopt the most salient, available
anchor and fail to adjust subsequent judgments adequately away f r o m that
anchor. It is easy to imagine that the negotiator's illusions o f optimism and
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control (Taylor and Brown, 1988), as well as the overconfidence bias (Einhorn
and Hogarth, 1978), will lead the negotiator to anchor nlore heavily o n w h a t
he or she would like to get (the target) than o n w h a t h e or she is willing to
accept (the reservation price). If each negotiator focuses too m u c h o n targets,
together they may fail to realize that a middle ground c o m p r o m i s e exists in
which both parties will benefit. 4
Within a two-party negotiation, it is conceivable to imagine that o n e p a r t y
might enter with a w i d e r aspiration zone than the other, d e p e n d i n g o n economic constraints, desire for settlement, cognitive m a n n e r for processing potential outcomes, etc. This means that one negotiator's entering target for setdement
will be farther away f r o m the bargaining zone than the other party's. If we
assume that first offers are correlated w i t h initial targets, the negotiator w i t h
a wider aspiration zone is likely to make a m o r e extreme first offer. This negotiator is then also m o r e likely to m a k e larger concessions in p r o p o r t i o n to his
or her starting offer, because he or she has m o r e space available for m o v e m e n t .
The above argument suggests that a negotiator w h o s e aspiration p o i n t is further away from the bargaining zone m a y feel that he or she is m a k i n g m o r e
concessions than the o t h e r party. This feeling may, in turn, lead to a perceived
violation of fairness n o r m s (e.g., " I ' v e m o v e d $25 and he's m o v e d o n l y $5.").
Subsequently, in line w i t h the findings of Guth, Schmittberger, a n d Schwarze
(1982), we m a y expect impasse to result.
Conclusion
As argued above, three separate lower b o u n d points exist that are salient to the
negotiator at different points in a negotiation. The BATNA, as Fisher a n d Ury
(1981) define it, represents the value o f the negotiator's best alternative to a
negotiated agreement. It is the best o u t c o m e that the negotiator can expect if
the current negotiation results in impasse. The negotiator's reservation price
equals his or her BATNA plus or minus any estimated transaction costs, depending u p o n w h e t h e r the negotiator is in a buying or selling role, respectively. This
transaction cost is the value that the negotiator places o n the t i m e a n d energy
that would be e x p e n d e d to find another negotiator or to enact a guaranteed
alternative outcome. Both the negotiator's BATNA and reservation price values
are calculated based u p o n e c o n o m i c considerations and should b e d e t e r m i n e d
external to the actual negotiation. T h e y are influenced by prevailing m a r k e t
conditions and alternative investment opportunities.
The negotiator's resistance point is influenced by his or her reservation
price, but it is also affected by m o r e subjective factors. It is this subjective
resistance point u p o n w h i c h negotiators seem to base their actions. T h e negotiator's resistance point m a y be located above or b e l o w his o r h e r reservation
price, depending u p o n utility preferences for agreement and o t h e r trade-offs.
The resistance point m a y also change during the negotiation, d e p e n d i n g u p o n
h o w the negotiator processes the interaction. This m o v e m e n t will c o r r e s p o n d
to: (t) w h e t h e r the negotiator decides he/she likes his/her o p p o n e n t ; (2) his/her
level o f c o m f o r t with uncertainty and n e e d for structure; and (3) his/her perceptions of w h e t h e r the negotiation is proceeding "fairly." Thus, while there
are certain conditions u n d e r w h i c h the BATNA a n d reservation p r i c e m a y be
close approximations o f o n e another, they m a y at best serve o n l y as initial
anchors f r o m w h i c h the negotiator's true resistance point emerges.
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The adoption o f this tlu°ee-part framework for understanding the negotiator's lower bound has a number o f interesting implications for the negotiations
field. First, it provides analytical clarity for behavioral researchers w h o seek
to study negotiator behavior. W h e n conducting studies of negotiated outcomes,
differences among the concepts of the BATNA, reservation price, and resistance
point should be understood and incorporated into analyses. Second, it suggests
that practitioners should be aware of situational and interpersonal factors that
can lead the negotiator to adjust or ignore his or her "rationally" calculated
reservation price during negotiations. These factors include issues such as the
need for structure, risk aversion, an interest in fairness, an interest in relationships, etc. Finally, the existence o f the subjective resistance point has theoretical implications in that the utility measures that negotiators use to make decisions
are not necessarily ftxed by the environment surrounding the negotiation. While
the anchor of a reservation price may be calculated based u p o n structural constraints (such as prevailing market conditions), the final range o f acceptable outcomes that the negotiator considers is influenced by the actual negotiation.
This perspective is in direct contrast to current game theoretic analyses
and the prescriptive advice of many negotiation scholars and practitioners. Game
theoretic analyses assume that negotiator's utilities for outcomes are stable and
may be determined in advance. Consequently, prescriptive negotiation models,
based u p o n game theory (such as Raiffa, 1982), assume that negotiators can
set and implement reservation prices u n h a m p e r e d by psychological factors.
Clearly, the evidence presented in this article highlights the need for introducing a more descriptive c o m p o n e n t into both research and prescriptive models.
Negotiators are influenced by the negotiation interaction, and it is this descriptive viewpoint that we propose as a next step in negotiations research.
NOTES
T h e ideas for this article were inspired by early conversations w i t h Robin Pinkley a n d s u p p o r t e d
by the Dispute Resolution Research Center at N o r t h w e s t e r n University. T h e a u t h o r s w o u l d like
to t h a n k an a n o n y m o u s reviewer for his c o m m e n t s o n a n earlier draft o f this article.
1. This concept is also closely related to theoretical e c o n o m i s t s ' n o t i o n o f a reserwation value
(e.g., Nash, 1950).
2. T h e BATNA a n d the reservation prices are fixed p r e s u m i n g that s o m e aspect that defines
t h e m does not change during t h e focal negotiation. For example, if I have a n o t h e r offer o n m y
house, o t h e r t h a n t h e o n e I a m currently negotiating, b u t s u d d e n l y learn that that b u y e r is n o t
financially stable, I w o u l d probably w a n t to adjust m y BATNA, as well as m y r e s e r v a t i o n price.
3. For the p u r p o s e s o f simplicity, this article deals o n l y w i t h situations w h e r e a n explicit
reservation price is already k n o w n to t h e negotiator. This c o n d i t i o n allows us to u n t a n g l e t h e
process o f reservation price d e t e r m i n a t i o n f r o m resistance p o i n t determination. In actuality, t h e
processes are probably closely intertwined.
An explicit reservation price m a y take the f o r m o f a guaranteed alternative positive o u t c o m e
if settlement is n o t reached, i.e., an explicit BATNA. It m a y also m e a n a zero or negative o u t c o m e
in the event of impasse. Each o f t h e s e cases is d e m o n s t r a t e d by t h e t w o earlier examples.
4. tt is possible for targets to c h a n g e d u r i n g a negotiation b a s e d u p o n n e w i n f o r m a t i o n that
b e c o m e s available about attainable o u t c o m e s ; howeveL t h e typical n e g o t i a t i o n p r o c e d u r e will
likely a n c h o r aspiration levels at o r b e l o w a negotiator's first o r o p e n i n g bid.
Negotiation Journal O~-~ober1991 387
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388 White and Neale Reservation Prices, Resistance Points, and BATNAs