1.4 How Should I Analyze a Negotiation?

A. What questions should I ask to complete an

analysis?

B. What is my BATNA in a dispute resolution
negotiation?

C. How can I use decision trees to complete
my BATNA analysis?
 A Decision Tree Primer:
A Dispute Resolution Example
Your company has sued a supplier for 4.6 million.
There is a 50-50 chance that your company will win.
Future legal and other expenses to litigate the case
total 400,000.

During negotiations, the defendant has offered to

settle the case for 2 million. Should your company
accept the offer?
 Win

Continue
Lose
Settle
 Win 4.2 M
.5
Continue
Lose -400 K
.5
Settle
2 M
 Win 4.2 M
.5
Continue 1.9 M
Lose -400 K
.5
Settle
2 M
 A Deal-Making BATNA Analysis
Decide: Acquire Company A (21 million expected net present
value) or Company B (15 million)? Price is the same for
both companies.

If A: 90% chance government will challenge and a 60% chance
government will win.

If government wins, ENPV drops to 14 million (legal fees

plus sell-off costs). If government loses, ENPV drops to
19 million (legal fees)

If B: No government challenge
 Gov’t Wins
14
Gov’t Challenge .6
16
.9 .4
Acquire 16.5
Company A 19
.1 Gov’t Loses
21 M
No Gov’t Challenge

Acquire Company B
15 M

Source: Victor, “Predicting the Costs of Litigation,” Planning Review

 Conclusion
•  Decision trees are valuable tools for
analyzing your BATNA in both dispute
resolution and deal- making negotiations.

•  This tool is also useful in making other
complex business decisions.