Reserve Price

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Sealed-Bid Auction

    A type of auction process in which all bidders simultaneously ...
  2. Reverse Auction

    A type of auction in which sellers bid for the prices at which ...
  3. Auction Market

    A market in which buyers enter competitive bids and sellers enter ...
  4. Dutch Auction

    1. A public offering auction structure in which the price of ...
  5. Auction

    A system where potential buyers place competitive bids on assets ...
  6. Authorization Only

    A type of sale transaction that creates a pending transaction ...
RELATED FAQS
  1. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  2. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  3. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
  4. How difficult is it to understand business analytics?

    In the abstract, business analytics is the study of financial, economic, consumer and production data through statistical ... Read Full Answer >>
  5. At what levels are core competencies required for businesses operating in the primary ...

    Core competencies help businesses understand their best abilities to perform in the market. Primary sector businesses mine ... Read Full Answer >>
  6. What are the variables in variable costs?

    Variable cost is an economic term that refers to an expense a company is facing that varies based on factors that are inconsistent ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Fine Art Can Be A Fine Investment

    The art market is fickle, and there are no guarantees of profitability, but with a little legwork and forethought you can fill your home with images that may prove worthy investments down the ...
  2. Home & Auto

    Should You Buy A House At Auction?

    The traditional real estate market isn't the only place to conduct your home search. Auctions also bring many buying opportunities.
  3. Entrepreneurship

    How To Master Online Auctions For Fast Cash

    Online selling is just as easy as in-person selling and can yield five to 10 times the profit.
  4. Options & Futures

    Shopping Online: Convenience, Bargains And A Few Scams

    Shopping from the comfort of your couch has major benefits - and some unpleasant side effects.
  5. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  6. Economics

    Explaining Cash On Delivery

    Cash on delivery, also referred to as COD, is a method of shipping goods to buyers who do not have credit terms with the seller.
  7. Fundamental Analysis

    Understanding the Simple Random Sample

    A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.
  8. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  9. Economics

    Understanding Economic Order Quantity

    Economic order quantity is an inventory-related equation that determines the optimum order quantity that a company should hold in its inventory.
  10. Economics

    What is Net Margin?

    The ratio of net profits to revenues for a company that shows how much of each dollar earned by the company is translated into profits.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center