I've always thought it was price discrimination, so the people who really want a cheap flight can put up with less bags instead of not flying at all
As someone who travels light (even with kids) I appreciate it. I check 1 bag at most and it incentivizes us to pack smartly. The people who want to bring a lot of bags can pay for it as needed.
"DISCERNING, JUDICIOUS discriminating buyers"
[1] https://www.merriam-webster.com/dictionary/discriminating