zopa

ZOPA, short for Zone of Possible Agreement, is a concept in negotiation theory that denotes the range within which an agreement is possible between two or more parties. It exists when the parties’ reservation points, meaning the minimum terms a party will accept and the maximum terms a party will offer, overlap. In a straightforward monetary negotiation, the buyer is willing to pay up to a certain price and the seller will accept at least a certain price. The ZOPA is the interval between the seller’s minimum acceptable price and the buyer’s maximum willingness to pay. If the buyer’s maximum is lower than the seller’s minimum, there is no ZOPA under those terms, and a deal is unlikely unless concessions or new information arise.

ZOPA can encompass non-monetary terms as well, such as delivery timelines, quality standards, warranties, or risk allocations. In multi-issue negotiations, the ZOPA is defined across several dimensions and may be a multidimensional space rather than a single numeric interval. Practically, negotiators seek to identify a ZOPA by eliciting information, estimating BATNAs (the best alternatives to a negotiated agreement), and observing offers and concessions. A nonempty ZOPA suggests that a deal is possible and that offers within or near that zone have a higher likelihood of mutual benefit.

Limitations include the private nature of reservation points, imperfect information, and dynamic changes as new data emerge. Psychological factors, beliefs about the other party’s constraints, and strategic behavior can obscure the ZOPA. Even with a known ZOPA, optimal deals depend on how well negotiators create value within the zone and align concessions with interests.

Note: ZOPA should not be confused with Zopa, the UK peer-to-peer lending platform. See also BATNA, reservation price, and integrative negotiation.