If I found out my company worked on this basis, I would leave. It's shitty behaviour. People don't have time to go out and interview at other companies. Not to mention, you're burning any future potential with the other company when you waste their time.

>> If nobody else wants to pay you more, why would I?

Because I bring value to you, do a good job, and you don't want me to leave (which I can do, even if I don't currently have an open offer). You don't want to have me leave suddenly and have to spend time and money hiring someone new and training them. That's why you would pay me more even if I don't rub another offer in your face.