The Dark Side of Discounts: One Side Has to Lose. 

How can people feel good about buying something with a deep discount when they know the seller might lose everything in that transaction?

Human in distress

I recently read an article about a developer who took his own life while facing financial challenges. He was about my age with a similar background. I did not know him, but the story felt personal. Real estate is a brutal industry where one person’s loss is someone else’s gain. I love bragging about buying something with a discount. I hunt for value. Even though I was taught to find creative ways to grow the pie instead of splitting the pie, sometimes it is inevitable. When we acquire an asset – be it a trinket on Amazon, a car, or real estate – with a huge discount, it feels great. But what we rarely think about is sometimes the seller is forced to let go of that asset at a loss, a big loss. 

This made me wonder how some people can be happy about getting that bargain when it may cause anguish in others—in the case of this poor guy, forcing him to take the road of no return. I did a quick research on this, and here is what I found. Many possible psychological factors influence people’s feelings about buying something with a deep discount. Here are some of them:

Discounts create happiness: Saving money makes people happier, as it activates the reward system in the brain1. People may feel good about getting a bargain, regardless of the seller’s situation. Was that house on the market for a while? I bet the seller would take a discount to get rid of it. The buyer does not think that the seller may owe more money than what they would receive. Foreclosure is another example. The lender takes the property, or a buyer acquires it at an auction. The original owner loses everything, potentially their life savings. 

The next two points are less relevant to my topic, but I found them interesting while researching the subject. 

Discounts assume consumers trust the seller: People tend to trust that the discounts offered by the seller are legitimate and fair2. They may not consider the possibility that the seller is losing money or desperate to sell. They may also feel that the seller is generous or benevolent for offering such a deal.

Discounts reduce the propensity to shop around: When people see a discount, they may feel a sense of urgency to buy it before it expires or runs out². They may not want to miss out on the opportunity or regret not taking it. This may prevent them from looking for other options or comparing prices.

Discounts appeal to different types of consumers: Depending on the type of discount and the wording used, discounts may attract different types of consumers who have different motivations and goals3. For example, some consumers may be more focused on achieving a gain (e.g., “Get $ off”), while others may be more focused on avoiding a loss (e.g., “Save $”). Some consumers may be more sensitive to relative discounts (e.g., “50% off”) than absolute discounts (e.g., “$10 off”). Some consumers may prefer discounts that are simple and easy to understand (e.g., “Buy one, get one free”) than discounts that are complex and require calculation (e.g., “25% off on top of 20% off”).

These are some of the possible explanations. Of course, not all people may feel the same way, and some may have ethical or moral concerns about taking advantage of the seller’s situation. Ultimately, it depends on the individual’s values, preferences, and emotions. 

Most importantly, please remain human. 

  1. The psychology of discounts • Yoast. ↩︎
  2. Leveraging the Psychology of Discounts to Make More Money. ↩︎
  3. The Economics Society, SRCC. ↩︎