The value proposition of the group-buying model for the average consumer is clear: to save money. Group deal websites like Groupon and LivingSocial push out deals that get cheaper with each participating shopper. The fact is, however, that the surefire way to save money is not to spend it at all; after all, a dollar saved is a dollar earned. We can live fine without most of what is advertised on Groupon, so what is making consumers buy in drones?

At the risk of stating the obvious, group-buying works because consumers are by and large irrational. Discounts and promotions are pushed as money-saving opportunities when, in actuality, retailers set the original retail price, thus the magnitude of savings can be exaggerated as much as the retailer wants. The only limit is the extent to which consumers would buy (i.e. believe) the discount terms. Yet savings represented in dollar amounts or percentages in deals somehow lead to a strong internal response in consumers, one that makes consumers feel dumb for not participating in the deal.

If that is the case, every retailer can theoretically increase their sales and profits immediately by marking up every single item they sell as much as realistically possible and then publicizing their original prices as discount prices. Perhaps this theory is also the reason that one can rarely find any retail store anymore that does not have some sort of sale going on at any given time.