What is an absolute auction?

An absolute auction is characterized by being conducted without any reserve price or minimum bid, meaning that the highest bidder at the conclusion of the auction wins the item regardless of the final bid amount. This format is appealing to both sellers and buyers because it ensures transparency and maximizes competition among bidders. Since there are no price restrictions, buyers know that they will secure the item for the amount they bid, which can drive higher prices due to the competitive nature of the event.

In contrast, the other options represent different types of auction formats. Some include a minimum reserve price, which can lead to a situation where an item does not sell unless that reserve is met. An auction that can be canceled at any time lacks the finality that an absolute auction provides, reducing buyer confidence and engagement. Finally, limiting the auction to specific buyers removes the essential competitive aspect that defines an absolute auction, where anyone can participate. Understanding these distinctions emphasizes the unique nature of absolute auctions in the broader auction landscape.