September 23, 2025
Reservation Price vs BATNA in NegotiationIn negotiation, clarity is power. Two of the most important concepts—Reservation Price and BATNA (Best Alternative to a Negotiated Agreement)—often get blurred, yet they play distinct roles in shaping negotiation outcomes. Understanding how they work separately and together provides the foundation for better decision-making, more confidence, and stronger results.
This article explores the meaning of reservation price vs BATNA, explains how to calculate each, and provides real-world examples to show how they function in practice. Drawing on Dr. Chester Karrass’s teachings, we emphasize that negotiation is not a guessing game—it’s a process that relies on preparation, discipline, and a clear understanding of both your limits and your alternatives.
Your reservation price is your absolute bottom line. It’s the final offer you’re willing to accept before you choose to walk away from the negotiation. If you’re selling, it’s the lowest price you’re willing to take. If you’re buying, it’s the most you’re willing to pay. Anything beyond that point is unacceptable.
This figure should be calculated carefully—not guessed at in the heat of discussion. It’s determined by facts, not feelings: by assessing your needs, your constraints, and your best available alternative (your BATNA). Dr. Chester Karrass often reminded negotiators that “the best negotiators are prepared.” That preparation includes knowing what success looks like—but also knowing when a deal crosses the line into failure.
Importantly, your reservation price is not your starting point. Many negotiators make the mistake of revealing or even beginning with their reservation price. Doing so gives away all of your flexibility and strips you of leverage. Keep it to yourself. It’s not a tool to use on the other side—it’s a boundary to protect you.
BATNA stands for Best Alternative to a Negotiated Agreement. It’s what you’ll do if no agreement is reached. Unlike your reservation price, which sets your limit inside the negotiation, your BATNA exists outside of it—it’s your escape route.
If you're selling a service, your BATNA might be another client who's ready to buy. If you're job hunting, your BATNA could be a second job offer. If you’re in procurement, your BATNA could be switching to another supplier or solving the problem internally.
A well-developed BATNA does more than protect you—it empowers you. It gives you confidence, flexibility, and the ability to walk away without regret. KARRASS taught that “you have more power than you think,” and nowhere is that truer than with BATNA. When you understand your real options, you no longer negotiate from fear—you negotiate from choice.
You can also strengthen your BATNA before a negotiation by taking strategic action: reaching out to alternative vendors, researching comparable offers, or preparing contingency plans. The stronger your BATNA, the more assertively you can hold your ground and shape the outcome in your favor.
Though closely linked, BATNA and reservation price serve different functions and come from different places in the negotiation process.
Your BATNA informs your reservation price, but they are not the same. Think of BATNA as the lens through which you determine your reservation price. If your BATNA is worth $12,000, then your reservation price should be $12,000 or better. If someone offers you $11,000, you walk. If they offer $13,000, you consider accepting.
Where negotiators go wrong is by failing to define either. Without BATNA, you don’t know your options. Without a reservation price, you don’t know your limits. And without either, you’re not really negotiating—you’re improvising.
Calculating your reservation price is a thoughtful, deliberate process. Here's how to do it well:
Dr. Karrass emphasized that negotiation is not a guessing game. “In business as in life, you don’t get what you deserve—you get what you negotiate.” Without a clearly calculated reservation price, you're negotiating blind.
It's tempting to lean on just one of these tools, but effective negotiators use both in tandem.
Your BATNA gives you walk-away power, ensuring that you don’t accept a deal that’s worse than doing nothing. Your reservation price gives you walk-away discipline, ensuring that you don’t slip below your minimum acceptable deal even if you’re tired, pressured, or tempted.
Understanding both helps you:
More than anything, it gives you flexibility within boundaries—the sweet spot of negotiation.
Some negotiators attempt to define a reservation price based on arbitrary numbers, internal budgets, or emotional preferences—without ever developing a real BATNA. This is dangerous.
Without a BATNA, your reservation price has no foundation. It’s like drawing a line in the sand during a storm—it may wash away under pressure. You might cling to a number that has no bearing on reality or market alternatives.
Instead, start with your BATNA. Ground your reservation price in fact, not feeling. KARRASS’s negotiation process always emphasized rigor before reaction. You can't defend a limit you never defined, and you can't define a limit without understanding your alternatives.
You’re offered $70,000 for a new role, but your current job pays $68,000 and offers better work-life balance. Your BATNA (staying in your current job) is worth about $72,000 in value to you, when you include flexibility and benefits. That makes your reservation price for accepting a new role around $72,000—anything below that, and the switch isn’t worth it.
A supplier offers to deliver materials at $25/unit. Your BATNA is another vendor offering the same materials at $24, but with a longer lead time. If reliability is a concern, your reservation price may still be $25 or slightly higher depending on your needs. But if time isn’t critical, your reservation price may align with the alternative.
You’re buying a house and set your reservation price at $500,000 based on your mortgage approval and budget. Your BATNA is renting for another year in a stable market. If the seller won’t budge below $515,000, your BATNA might look more attractive—especially if other costs (like renovations or interest rates) raise the effective price.
A strong BATNA is your negotiation insurance policy. It boosts your confidence, improves your leverage, and allows you to say “no” when the terms don’t meet your needs. Here’s how to improve yours:
Preparation is not just about planning your moves—it’s about increasing your power before the negotiation even starts. Dr. Karrass taught that power is never given; it’s developed through knowledge, preparation, and creativity.
Most of the time, your reservation price should be kept private. Revealing it prematurely weakens your position and eliminates your negotiation flexibility. However, in some cases, strategic disclosure may serve a purpose—especially if you're at an impasse and need to signal you're at your limit.
If you do reveal it, do so with caution and conviction. Don’t present it as a flexible suggestion—present it as a firm final offer. Even then, it’s typically better to communicate signals rather than specifics. For example:
“We’re nearing the edge of what we can accept.” “Beyond this point, we’d need to explore other options.”
As always, use restraint and strategy—not emotion.
Walk-away power is more than a tactic—it’s a mindset. It means knowing when to stand firm, when to explore alternatives, and when to step away entirely. That power doesn’t come from bluffing—it comes from having a strong BATNA and a clearly defined reservation price.
Dr. Karrass often warned against negotiating from desperation. When you feel like you must make a deal, you lose objectivity and give up leverage. When you have real alternatives, you're not just hoping for a good deal—you’re positioned to get one.
Walk-away power reminds us of a fundamental truth: No deal is better than a bad deal. And a great deal is built on the discipline to say “no” until it becomes a “yes” worth accepting.
A reservation price is the lowest acceptable outcome you’re willing to accept in a negotiation. It’s a firm boundary, determined by your best alternative (your BATNA) and other relevant factors like cost, timing, and non-negotiables. If the other party offers less favorable terms than your reservation price, you walk away. It's your last line of defense against making a poor agreement.
BATNA is your best course of action if no deal is reached, while your reservation price is the worst deal you’ll accept before opting for that BATNA. BATNA is external, the alternative you fall back on; reservation price is internal, the threshold that defines deal vs. no deal. Both serve different roles, but they work in tandem to guide smart decision-making.
You calculate your reservation price by evaluating your BATNA, factoring in associated risks and costs, and considering intangibles like timing, convenience, and long-term implications. It should be realistic, rooted in evidence, and set before the negotiation begins. Adjustments are possible, but should only be made in response to new, credible information.
Defining your reservation price ensures you don’t agree to a deal that undermines your goals. Without a firm reservation price, you may give in too easily or hold out for unrealistic terms. It anchors your strategy, guards against emotion-driven decisions, and helps you evaluate offers objectively.
Yes, but only in response to new information. If your BATNA changes—like a competing offer falls through—or if the current deal offers unexpected value, it’s rational to reassess. However, changes should be logical and carefully considered—not the result of fatigue, anxiety, or pressure. KARRASS negotiators stay flexible, but always with purpose.
More than 1.5 million people have trained with KARRASS over the last 55 years. Effective Negotiating® is designed to work for all job titles and job descriptions, for the world's largest companies and individual businesspeople.
Effective Negotiating® is offered In-Person in a city near you, or Live-Online from our Virtual Studios to your computer. See the complete schedule here.
EFFECTIVE NEGOTIATING® LIVE ONLINE
EFFECTIVE NEGOTIATING II® LIVE ONLINE
Have questions or need assistance? Reach out to our team