How do absolute auctions differ from reserve auctions?

Absolute auctions are characterized by having no minimum price requirement, which means the item will be sold to the highest bidder regardless of the final bid amount. This approach creates a sense of urgency and encourages competitive bidding, as participants know that they will have a chance to win the item without the worry of a reserve price that could prevent the sale.

In contrast, reserve auctions set a minimum price, known as the reserve price, that must be met for the auction to result in a sale. If bidding does not reach this minimum threshold, the item may not be sold at all. This key distinction sets absolute auctions apart and helps define their unique appeal to both sellers, who want to ensure a sale, and buyers, who appreciate the potential for lower prices.

The other choices introduce ideas that do not accurately describe the differences between absolute and reserve auctions. Notably, reserve auctions can take place in various formats, including online and in-person, and are not limited to a specific type of item such as real estate. Furthermore, in a reserve auction, it is the auctioneer or seller who sets the starting price, not the bidders themselves.