The reserve price is the confidential minimum amount a seller is willing to accept for a lot. If bidding doesn’t reach the reserve, the lot does not sell. The reserve is set during consignment negotiations between the consignor and the auction house.
Reserves are usually kept secret from bidders to prevent strategic bidding right up to the threshold. The auctioneer may chandelier-bid the lot up toward the reserve to maintain bidder engagement, then call the lot “on the market” once the reserve is met — at which point all subsequent bids are real and the lot will sell. Setting reserves too aggressively is a primary cause of high RNA rates.
Reserve-setting is a negotiation between consignor expectations and market realities. Consignors typically anchor their reserve to the appraisal value or what they paid; auction-house specialists try to anchor it to recent comparable sales. The right reserve is high enough to protect the consignor from a giveaway but low enough that bidding is likely to reach it. A reserve set 20% below the low estimate is conservative; one at the low estimate is standard; one above the low estimate is aggressive and likely to result in passing if the market is soft.