What is a "reserve price"?

A reserve price is defined as the minimum price a seller is willing to accept for an item being auctioned. This term is crucial in auction settings because it protects the seller from selling the item for less than they deem acceptable. The reserve price is not disclosed to bidders and acts as a safeguard, ensuring that the item will not be sold unless bidding reaches that predetermined threshold. If the bidding does not meet this minimum, the item may not be sold at all, allowing the seller to retain ownership.

In contrast, options that refer to the maximum price a buyer is willing to pay or the average price from past auctions pertain to buyer perspectives and historical data rather than the seller's minimum acceptance strategy. Similarly, the fee charged by the auctioneer is unrelated to the auction item's value and focuses instead on the services provided. Understanding the concept of a reserve price helps participants navigate the auction process and underscores the seller's control over the transaction.