Final answer:
Sales discounts may be used to manage pricing without constant catalog updates, but their use to conceal prices from competitors is not their primary purpose. They are part of strategic pricing and can affect consumer perceptions in markets with imperfect information.
Step-by-step explanation:
The statement suggests that sales discounts are used to avoid frequent changes in catalog prices and to hide the true invoice price from competitors. This is partially true; while sales discounts can be used to temporarily adjust prices without updating official pricing, their use as a tool to hide the true invoice price is not typically their primary function.
Businesses may use discounts to quickly respond to market conditions, manage inventory levels, or provide incentives for customers without the need to permanently change their catalog prices.
However, the intention to conceal prices from competitors is more closely related to trade secrets or strategic pricing tactics like predatory pricing, which involves temporary price cuts to discourage competition.
From an economic perspective, the interpretation of price as a signal of quality can indeed influence consumer behavior. If car dealerships lower prices, it might be interpreted as a sign of low quality, deterring consumers even though the dealer's intention was to increase sales.
Conversely, higher prices might be seen as an indicator of better quality, potentially leading to higher sales under the assumption of increased value. This relationship explains why pricing strategies are not just about competitive positioning but also about the perceptions formed in a market where information is imperfect.