That one is the classic "weak leader" no. I had this happen to me while I was still in college. Where I went everyone had specific rules for each class, where the seniors had the most leniency, but were still not given real freedoms.
As part of a negotiations class, myself and three others had to create a topic and then negotiate a deal with someone. I chose to negotiate more freedoms for the seniors with one of our top officials. We did a ton of background research on why and how and implications etc... We gave our pitch, answered lots of "tough" questions and afterwards asked "So are you willing to make the change?"
The response was a fantastic display of political wriggling but ended up with basically this response: "I think this is great you guys, but here is what I need you to do so we can make this happen. I need a legal review from 4 different legal disciplines, then I need to see a study of expected outcome effectiveness for your proposal, then you will need to do a poll of the student body to see if they would accept it. Only then, will we be able to make a truly INFORMED decision."
I saw the NO from a mile off that day, so I said thank you, got my A in the class (Despite not getting to any BATNA) and went on with my life having seen what a disguised NO really looks like. I am confident even if I had done all that work the answer would have still been no, I just would have put hundreds of hours into getting a firmer no.
Lots of people find it easy to be "nice" to others when there is nothing on the line - no money, no reputation, nothing at risk. Why say something critical and create bad feelings when you gain nothing by it? Surveys and market research get skewed for this reason.
You always get more honest and accurate feedback when you actually "ask for the sale". It doesn't even have to be a literal "sale", it could be a change in a policy, as in the story above.
You may be mistaking BATNA with ZOPA (zone of potential agreement). There wasn't any ZOPA here apparently.
The CFO at the company I work for tried to jerk me around by saying they wanted to put off bringing me on permanent, a $400 a week difference, for months. The company's BATNA in this situation was even worse than the status quo. It took them four months to find me and I've been doing great. I made some token efforts at negotiating, then started playing hardball by calling the staffing agency and threatening to leave. They folded practically instantly.