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What is “WATNA/BATNA”?

As in many other professions, mediation has succumbed to the use of acronyms to abbreviate theory titles and practice tools. That said what these two acronyms stand for can be very important to the parties involved in a mediated settlement conference.

“BATNA” – Best alternative to a negotiated agreement.

“WATNA” – Worst alternative to a negotiated agreement.

In its simplest form, parties involved in a dispute are taken through an exercise to consider their best and worst alternatives that do notrequire agreement from the other person. In addition to identifying a range of alternatives, the analysis should assign some probability of occurrence to each alternative. Each party to a dispute will have a unique “BATNA” and “WATNA” based on a variety of factors including legal precedent and interests.

In practice, the “BATNA” can be helpful when evaluating a potential settlement. While it is generally accepted that the better the “BATNA” the better the bargaining position, this can be a flawed theory. For example, in the absence of a mediated settlement, the parties may end up in a court of law. While he/she may ultimately prevail, the evaluation should consider the additional costs in time, money and emotional toll as well as the potential risk to the relationship between the parties.

The “WATNA” can be useful in evaluating whether to walk away from an agreement. If the “WATNA” is better than the current proposed resolution, a party may be inclined to take the risk and walk away from the mediated settlement conference. This despite the fact that the “WATNA” is not desirable.

In mediation, the “BATNA/WATNA” exercise can be helpful in restoring momentum in an otherwise stalemated discussion. By taking the time to thoughtfully consider their interests and how or whether they would be served by a “BATNA/WATNA”, the parties very often become better negotiators.

Let’s look at an example of a “BATNA/WANTA” analysis using a real-life scenario. Assume that you recently purchased a home and, after moving in, discover that the home is infested by termites. You believe that the Seller had some degree of knowledge and, therefore, made a potential material misrepresentation in the contract for purchase.

You are the new homeowner (Plaintiff). Before you file a lawsuit you want to attempt to reach a resolution in mediation. During the mediated conference, you develop the following “BATNA/WATNA”:

BATNA

  • 70% probability of proving that the Seller was aware of the termites and that they are liable for the cost of remediation ($30,000).
  • To take this case to court will cost an estimated $10,000.
  • Thus, there is a 70% probability of netting $20,000 IF no mediated agreement is reached.

WATNA

  • 30% probability of proving no liability by Seller. Thus, no recovery.
  • To take this case to court will cost an estimated $10,000.
  • Thus, there is a 30% chance of spending $10,000 with no recovery.

Let’s consider the “BATNA/WATNA” now in terms of a proposed settlement by the Seller. If they offer $15,000 to settle the matter by mediated agreement, would you accept? Here’s how your analysis might go:

  • 100% probability of receiving $15,000 today
  • 70% probability of netting $20,000
  • 30% probability of losing $10,000

Regardless of your answer, going through the exercise will better prepare you to evaluate resolution alternatives and negotiate more effectively.

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