What is Reality Testing?
Reality testing involves "techniques used to adjust perceptions that do not conform to the realities of the situation." In conflict resolution, it is a process that may be helpful when negotiations breakdown. Sometimes, a party to a negotiation will think they have an alternative or option that is better than what they will get through negotiation.
(Fisher, Ury, and Patton called this a better BATNA ). If a party thinks they have a good BATNA, then they may refuse to agree to a settlement, causing an obstacle in the negotiation process. If the BATNA truly is better for that party than the proposed agreement, then the agreement will have to be abandoned, or changed to accommodate that party. However, a party's BATNA is often unrealistic. If a party is refusing to agree to a settlement based on an unrealistic BATNA, then the mediator or opposing party must educate the reluctant party through reality testing.
How is Reality Testing Done?
The actual process of reality testing "involves asking hard questions about each parties' power and options."  Either the mediator or the opposing party must convince the resistant party that their BATNA is not as good as it seems and get them to understand what will happen if they stick with it. There are many reality-testing questions one may ask.