When you sell something of value using eBay auctions and want to protect your investment—that is, you want to avoid selling it for too low of a price—you have basically two choices: you can either use a reserve price or you can start the bidding high. Let's look at an example to illustrate.

Suppose you have an item that costs $50 and you want to try and get at least $60 for it to cover costs and fees. One way to protect your costs and fees is to make the item's starting price around $60 (for example, start the bidding at $59.95). Assuming a basic eBay listing with gallery photo, your listing fee would be $2.75 for this.

One issue with this is that some buyers may avoid the auction entirely because of the perceived high starting price. To avoid this problem, you can use a reserve price. The reserve price is used to set the lowest price at which you are willing to sell your item. It is not visible to the bidders and you can set the bidding as low as you want to attract more bidders.

In our example, we might set the reserve price to $59.95 and the starting price at 99 cents. If the auction only reaches $55.95, you are not obligated to sell the product if you've used the reserve price. Assuming a basic eBay listing with gallery photo, your listing fee would be $4.75 for this. $2.00 of this fee is a reserve price fee and would be refunded if your item sells. If it does not sell, you will not be entitled to a refund of the $2.00.

You may have noticed that if the item fails to sell using a reserve price auction scenario, it would cost you $2.00 more than just starting the bidding high. That $2.00 might not seem like much, but it can really add up over multiple items. So which one is best to use?

eBay auctions: Which pricing method is best?

Unfortunately there is no "one size fits all" answer. Some products do perfectly well with higher starting prices using no reserve. Products that are in higher demand often have no trouble selling at a higher starting prices.

Some products, on the other hand, do better with a low starting price and a protective reserve price. It is legal from eBay's perspective to reveal your reserve price to the bidders in your listing description. Many sellers do this in order to remove the guesswork from the buyer's mind (today's buyers tend to dislike "mystery prices"). In this instance, you might look at the reserve price as an insurance policy.

Often, you will just have to test your items to see which eBay auctions pricing method works best. But either one can help you avoid selling your higher-value eBay items for too low a price.

FAQs about reserve prices vs. starting bids

Below we have summarized the most important questions and answers on the subject.

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