It makes the buyer feel better because the buyer gets intentionally misinformed about the value of the item. That lies can make someone feel good does not necessarily make the lie okay. (I suppose it might in some circumstances, but I don't think trying to manipulate someone into spending money is one of those circumstances.)
If you think discounts are completely meaningless, then completely banning advertising with discounts is very easy to implement and enforce. Much easier than to properly educate everybody how to arm themselves against deceptive sales practices (though I agree it would be nice if we could do that).
The value of an item is decided at the time an agreement is made between a seller and buyer. There is no one size fits all "value" until then. This can easily be seen in goods such as low volume, high margin goods such as land, vehicles, heavy equipment, intellectual property, and of course, labor.
However, in the developed world, logistics and supply chains have sufficiently developed to allow for minuscule margins on many everyday, low price items that make it uneconomical to negotiate the value of each item to each buyer, so the seller just lists one price for everyone.
In markets in poorer countries, the seller might not do that, and it might be worth their time to negotiate each sale. If they say to one buyer "I'll sell this to you for 50% off today, and charges him the same price as yesterday, and the buyer agrees to buy", who is harmed?
Price discrimination is a natural part of markets, and the only reason it hasn't been happening is because it wasn't worth the retailers time in the US. But with automated systems coming into place, there is no more labor cost and so it's becoming economical to price discriminate again.
If you want to get technical about it, the value is determined by the market, by the forces of supply and demand. Advertising with a fake discount suggests that the market was willing to pay more for the product than it actually was.
Most products are actually sold with a one size fits all price. People don't haggle over every single item they buy in a shop.
The market does not pay for anything. Individual buyers pay for things, and individual buyers and sellers determine the value of items, at a certain place, at a certain time.
Most everyday items are sold “one size fits all” (but not in large quantities) in developed countries (since the seller's time is valuable enough to offset the extra revenue (or loss) from price discrimination), but there are quite a few places in the world where people still haggle over the price of tomatoes and onions.
But even in the developed world, once you move beyond low margin retail items that are not expiring goods, there is no single sale price. Sometimes price discriminating turns off more customers than the revenue it generates or the labor it costs the seller, so it doesn't make sense for a seller to do it. Sometimes it's worth it, so some sellers might.
Do we really need to deconstruct all of economics here? The market consists of those individual buyers and sellers. But they set the value together. No single buyer can set the value of the items they want to buy in the supermarket. They buy them or they don't buy them. In response to that, the seller adjusts the price. If not enough people buy it, the seller lowers the price, if he runs out too fast, he raises the price. That is "the market" determining the price in a free market.
So if a potential buyer sees something 70% discounted, that implies that originally, the market determined that higher price as a fair price: a price that at least some buyers would pay for this item. The buyer trusts the market that that is apparently a fair price, but today the buyer is in luck, because it's been discounted to below the usual market price!
If the seller advertises with a fake discount, he's betraying the buyer's trust in the free market by intentionally lying about what the market is willing to pay for this item.
>So if a potential buyer sees something 70% discounted, that implies that originally, the market determined that higher price as a fair price: a price that at least some buyers would pay for this item. The buyer trusts the market that that is apparently a fair price, but today the buyer is in luck, because it's been discounted to below the usual market price!
This whole paragraph is wrong in my opinion. A 70% discount does NOT imply anything other than it's 70% off of some number that the seller is free to decide, since they own the product they are selling and I'm not aware of any laws dictating what they have to sell at.
The second part I don't agree with is a seller selling at "below" market price. There is no such thing, unless the seller is doing charity work. When a sale happens, that is at the market price, unless of course there is some collusion where the buyer and seller agree to do some other trade-off to avoid paying taxes, but that's neither here nor there in this conversation.
On popular sale days, such as Black Friday, the sellers aren't selling below market price. They are selling at the price that they think they need to in order to get the publicity/feet in the door that they think will lead to other sales. In effect, the seller is buying the buyer's time and attention and whatever probability the buyer has of spending more money on other things with the "discount" they offered.
We're not talking about what the law says, we're talking about whether it's misleading.
If the amount from which it was discounted is utterly meaningless, then why mention it at all? Because the seller wants the buyer to believe the item is more valuable than it really is. That's why it's misleading.
The fact that the deception is legal, doesn't mean it's not deceptive. It is deceptive. It is very clearly, obviously, intentionally deceptive. The seller wants the buyer to believe they're getting a great deal that they're not getting, because the product was never actually meaningfully sold at that original price. That original price only exists to mislead the buyer.
Real life shows there exists a population of buyers that would prefer store A than store B in the example below:
Store A: sells item X at 80% off for $10
Store B: sells item X for $10
It's Kohl's and Bed Bath and Beyond and JCPenney's entire business model. Some people love waiting for their coupons at home and figuring out where they can get the most "%" off.
That's exactly my point: what store A does is very clearly misleading, and many people fall for it. People are being manipulated. That makes it not a free, informed market. If it was, store A would have no advantage over store B.
If you think discounts are completely meaningless, then completely banning advertising with discounts is very easy to implement and enforce. Much easier than to properly educate everybody how to arm themselves against deceptive sales practices (though I agree it would be nice if we could do that).