Zone of Possible Agreement (ZOPA)
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Identification
The zone of possible negotiation is a bracket conceived or offered to create the negotiation playing field. Popularized Negotiation Genius authors Deepak Malhotra and Max Bazerman.
Example
The ZOPA is determined by knowing your Best Alternative to Negotiated Agreement (your BATNA) which is what you would do if you don't reach an agreement with the opposing party. Next, compute the minimum (or maximum) you are willing to accept or part with. Finally, try to glean the opposition's BATNA and Reservation Value. If I am willing to stay in office space or find a sublessor or assignee given an increase in rent, my options are to stay or assign and pay what I think I can afford and find out their BATNA (leave the empty space on the market hoping someone new will come in) and their Reservation Value (market rent plus tenant improvements likely to be negotiated with new tenant).
Solution
Once established, this is used tactically as a range of negotiation to freeze the offer even though variable change. It fails when other elements are added or subtracted that shift the ZOPA, but it is seldom readjusted. You must readjust if value, timing, or risk increases. For example, I may be willing to pay $10,000 on $15,000 in back rent as a tenant once I get a new lease and get off the lease. The Landlord may say fine, but you are still a guarantor as per the assignment clause (standard on many commercial leases). If you assumed you would pay the back rent agreed upon once the new tenant took over the lease, and walk away without any continuing obligation (as guarantor) that would change the value, you may want to consider upping your payment say $15,000 to get out of being a guarantor, or lowering your back rent payment to $5,000 if you act as a guarantor to space you don't occupy.