‘Fiscal cliff’ talks will boil down to one obscure acronym: Batna

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http://www.washingtonpost.com/business/economy/fiscal-cliff-talks-will-boil-down-to-one-obscure-acronym-batna/2012/11/09/459b0c34-2a7b-11e2-b4e0-346287b7e56c_story.html

There is one word that a person needs to understand in order to grasp what will happen in the standoff over the “fiscal cliff,” the high-stakes standoff between Congress and President Obama to avert steep tax increases and spending cuts on Jan. 1.

That word is “Batna.”


t comes from negotiation theory, and is an acronym for “best alternative to negotiated agreement.” It is, for each side, what happens if there is no deal. Understanding what the batna is, for Obama and Congressional Republicans (along with other relevant groups, like Senate Democrats and tea party House Republicans) is crucial to predicting how things will shake out.

Think of it this way. In a negotiation over buying a car, it would seem simple to assess what happens for each side if there is no deal. The salesman’s batna is not having the commission income from a successful sale, and the buyer’s batna is having to drive their old car for a bit longer, or keep taking the bus.

But imagine if the salesman has been told he will be fired if he doesn’t get his sales numbers up. Suddenly, his batna is a lot worse; if he doesn’t close the sale, he could lose his job. The buyer doesn’t know that, but the salesman will naturally be more accommodating in the talks, likely resulting in a lower sales price. Or imagine if the buyer is just starting a new job, needs a car to get to work Monday morning, and doesn’t have any time to do comparison shopping; the buyer has a worse batna than it might seem, and will probably be less able to negotiate aggressively and will likely end up with a higher price.