Definition
A reserve price (or "reserve") is a confidential minimum price that an auction lot must reach for the sale to proceed. If bidding stops below the reserve, the lot does not sell. Reserves protect consignors from underselling but can depress final price if set above the realistic market clearing level.
Why it matters
Reserves are a balancing act. Too high and the lot doesn't sell, harming future marketability. Too low and you risk realizing below your minimum acceptable price.
Example
A consignor sets a reserve of $4,000 on a signed jersey. Bidding stops at $3,500. The lot is "passed" (does not sell) and is returned to the consignor.