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Reserve Price and Escrow Service

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1. Define the term "reserve price" and explain how the use of a reserve price can affect the progress and outcome of an auction.

2. Describe the services offered by an online auction escrow service. Name one advantage and one disadvantage of using this type of an escrow service.

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This solution provides answers to questions regarding reserve prices and escrow services.

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Anna Liza Gaspar

ANSWERS
Question 1
The reserve price is the minimum price that the seller specifies at the start of an auction. This price is the amount, which a seller is not obligated to award the offered item to the winning bid, which means that in order for the winning bid to get the item it should be above the reserve price.
Thus, the reserve price can significantly affect the outcome of an auction especially if the item has a low number of bidders with bids well below the reserve price. Hence, the ...

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