DEFINITION of 'Reserve Price'

A minimum dollar amount that the owner of an item up for auction will accept as the winning bid in the auction. The reserve price prevents the auction from being won at a price that is lower than the item's owner will accept. The auction's starting price tends to start lower than the reserve price to encourage bidding, but is forced to end at or above the reserve price or the auction is canceled.

BREAKING DOWN 'Reserve Price'

Reserve prices are designed to protect the owner of an auctioned item from an unfavorable outcome. However, auction bidders dislike reserve prices because they reduce the possibility of winning the auction at a bargain price, and because they create uncertainty over the minimum price that must be paid to win the auction.

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