What is Auction Reserve Price?
The minimum acceptable price set by the buyer below which the auction result will not be binding.
Definition
A reserve price is the threshold beyond which the buyer is not obliged to award - a floor in a forward auction, a ceiling in a reverse one. It can be disclosed to participants or held confidential, and that choice changes bidder behaviour.
How it works in practice
A buyer sets a confidential reserve at the level where an internal alternative becomes cheaper than buying. Bidding closes above it, so no award is made and the internal option proceeds. Had the reserve been published, suppliers would likely have bid to just inside it rather than to their own limit.
Why it matters
A reserve is only credible if the buyer will actually walk away. That is a question about alternatives rather than about auction settings - the same logic set out in our guide to BATNA in procurement.
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