Have you ever wondered what it takes to effectively prepare for negotiation success? An understanding of the Zone of Possible Agreement (ZOPA) is critical to a successful outcome. Where there is a ZOPA, people usually reach an agreement.
The Zone of Possible Agreement, or ZOPA, is the range in a negotiation in which two or more parties can find common ground. Here, the negotiating parties can work toward a common goal and reach a potential agreement that incorporates at least some of the other’s ideas. ZOPA is also sometimes referred to as the “bargaining range" or "bargaining zone."
When the terms that both parties are willing to agree to overlap, there is said to be a positive bargaining zone. That is, the terms the buyer agrees to clearly align with the terms the seller is willing to accept.
Take the sale of a used car, for example. The buyer is hoping to purchase a vehicle for a price between $2,500 and $3,000. The seller is willing to sell for a price between $2,750 and $3,250. In this scenario, a positive bargaining zone exists between $2,750 and $3,000, where both the buyer and the seller’s terms can be met.
When the terms that both parties are willing to agree to don’t overlap, there is said to be a negative bargaining range—also called a Negative Zone of Possible Agreement or Negative ZOPA. In these instances, a deal can’t be reached under current circumstances unless one or both parties are willing to adjust their view of what is acceptable.
In the case of the used car, a negative bargaining zone would exist if the buyer and seller could not reach an agreement. If the buyer is willing to pay no more than $3,000, yet the seller is willing to accept no less than $3,500, then neither party’s terms can be met.
In addition to understanding the ZOPA and negative ZOPA in a negotiation, you should also consider your Best Alternative to a Negotiated Agreement, or BATNA, before any discussions take place. The BATNA is the course of action a party will take if no agreement can be reached during a negotiation. In other words, a party’s BATNA is what they plan to fall back on if a negotiation is unsuccessful.
Harvard Business School Online Professor Mike Wheeler tackles this and other important negotiation concepts in his Negotiation Mastery course. To start, let’s listen to Professor Wheeler as he gives us a quick introduction of the Bridport case, highlighted in the course, and the concept of ZOPA:
In this example, a successful bed and breakfast called the Easterly is negotiating with Brims, a chain of coffee shops in the area, to prevent the construction of a building which would impede the inn’s view. As such, the Easterly is attempting to buy the neighboring land from Brims at a reasonable price.
Of course, the seller wants to drive the price up while the buyer wants to push it down. Here, the ZOPA exists where both the buyer and the seller are willing to settle the deal. That's what makes real-world negotiation interesting: Sometimes multiple outcomes could work for all parties, where there may be limited options in other scenarios.
The actual size of the ZOPA depends on how the perceptions of particular pairs of negotiators line up, especially in regards to their walkaway numbers. A price that could work in the first example might be rejected in the second, even though both pairs are negotiating the same problem.
Here are some key points to keep in mind when assessing ZOPA that will help you be better prepared when it comes to negotiating, and ultimately increase your chances of reaching a deal.
Luck, good or bad, plays a role. You don't always know who you'll negotiate with on a given day. Some people will be unreasonable while others may be willing to offer more than you'd ever hoped. While you should always employ your best negotiation tactics, remember that some circumstances will always be out of your control.
It's a huge advantage to know the upper and lower boundaries of a ZOPA. A negotiator is understandably reluctant to disclose their walkaway, or bottom line, as it’s the least attractive deal they would accept before walking away from the negotiation. By knowing the boundaries of a ZOPA, it's possible to push your counterpart close to their limit to reach a favorable deal.
The ZOPA can grow, shrink, or disappear during the course of a negotiation as parties refine their own priorities and reassess each other's walkaways. When preparing for a negotiation, remember that the situation can always change. Being able to adapt to these changes is a key factor to being a successful negotiator.
As shown throughout the Negotiation Mastery course, much of the interaction in a negotiation is about shaping perceptions of the ZOPA through persuasion and other tactical moves, as this is more likely to lead to an agreement.
Studies have shown that, in cases like Bridport, the parties’ initial aspirations and expectations before they ever get to the bargaining table have nearly the same impact on the final outcome as whatever they do and say once they get there. That's why rigorous preparation is essential.
Going into a negotiation, you seldom know how big the ZOPA is or whether there's room for agreement at all. If you’ve prepared well, you'll have set a provisional walkaway line. That establishes one boundary of the ZOPA, but the other boundary, your counterpart’s walkaway, will be obscure at best, just as your walkaway will be uncertain to them. That mutual uncertainty underlies much of the dance of offers and counteroffers that follows.
Negotiations are complex, with many factors contributing to the final outcome, but they don’t need to be an agonizing experience. Proper preparation and a solid understanding of key negotiation concepts and strategies can help you create maximum value in the agreements you reach.
Do you want to deepen your understanding of negotiation dynamics? Explore our eight-week online course Negotiation Mastery and learn how you can develop the skills and techniques needed to effectively close deals and reach agreements.
This post was updated on February 18, 2020. It was originally published on September 14, 2017.
Marcela served as a Product Manager at HBS Online for the Negotiation Mastery and Leading with Finance courses. Prior to joining HBS Online, she worked as a Research Associate at the Institute for Strategy and Competitiveness within HBS. In her spare time, she enjoys being with her dogs, Peanut and Lila, as well as playing tennis. Marcela holds a Master's in International Economics and Finance from Brandeis University, an MBA from Nebrija University in Spain, and a business degree from UNITEC in Honduras.
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