Yet, I think although they are similar in the way that both is about the 2nd highest option, there is fundamental difference between them.

Opportunity Cost, is really a kind of “cost”.

For example, I choose to go swimming, mean that I lose the chance of my 2nd highest valued activity, say biking.

So, I can say, my cost of go swimming is biking. I really have given up (paid) the biking to exchange for swimming.

For BATNA, I think we won’t consider it as a “cost”

For example, If company A offers me $20K/mth, while I am negotiating with company B, then my best alternative is $20K (BATNA). Say, finally, company B offers me $22K/mth. Then of coz I wll choose B.

But, will we say “I take the $22K offer with a cost of giving up the $20K offer”?

My feeling is, BANTA is something we are ready to & willing to give up, if we can make a better negotiated option.

For the opportunity cost issue, both swimming & biking we do not want to give up, but we HAVE to give up the less good one. So, the option that we give up is really a “cost”.

While, I think it is a bit strange to consider the BANTA that we wish we can give it up as a “cost”. I think I would feel more comfortable to decribe it as “best contingency plan” or “best backup option”.

I think most people are familiar with the concept but maybe don’t actually know they are employing it when they do. We use it quite a bit when negotiating with our client’s creditors. When you know that the creditor is going to be charging the account off the books in a few weeks, it makes the negotiation much easier. We know what their alternative is and by making a better offer at the right time, to the right person, a deal gets done.

-DC