What does the term 'reserve price' signify in an auction?

The term 'reserve price' refers to the minimum price that must be met for an item to be sold in an auction. This means that if the bidding does not reach this predefined price, the auctioneer is not obligated to sell the item, even if there were bidders interested. The reserve price acts as a safeguard for the seller, ensuring that they achieve a certain minimum value for their item.

Setting a reserve price can make the auction more appealing to sellers who may be concerned about selling their item for less than its perceived worth. It allows them to participate in the auction while still retaining control over the final sale price. In contrast, if the bidding exceeds the reserve price, the item becomes available for sale to the highest bidder, ensuring that the seller can achieve a satisfactory sale.