Call it a "decorating", "carpet", "updating", "paint" allowance it doesn't matter, they're all the same thing. Seller acknowledging that the house has some cosmetic drawbacks (could be paint, worn carpet, dated kitchen/baths among other things) and they're offering a dollar amount to buyers so the buyers can just fix that flaw after they close.
Here's the problem: When buyers view a home, they're focusing on how the house looks NOW. Offering an allowance won't make that carpet, kitchen, bathroom, etc any more appealing when buyers are walking through the house. It's difficult for a buyer to erase images of how the house looks now even with the offer of an "allowance". Images are very powerful to buyers.
Buyers choose a house based on emotion, feeling and when they picture themselves living there - all intangible elements but major factors in a buyer's decision.
Buyers don't want a project, they're looking for a home. Many don't want to deal with having to complete updating or cosmetic work. They don't want the hassle, inconvenience, and time involved with it, especially for buyers who need to move right into the house. It's not necessarily about what updates would cost, it's more about the inconvenience and a dollar amount isn't going to make that factor go away.
Offering an allowance to buyers, while it seems great and logical in theory, still is not going to change how the house shows. Any allowance is irrelevant if the buyers aren't seriously interested in the house and when there's glaring cosmetic work to be done, that's going to stand out in their minds.
There's always another listing to look at, and given a choice between move in ready house and one that needs some cosmetic help, most buyers will choose the move in ready home. An "allowance" just isn't enough to compete with a listing where the work's already done. Buyers are excellent at substituting even when they don't realize they're doing it - why would they pay the same for a house that needs cosmetic work when they can pay about the same for a house that's fresh, clean, neutral and doesn't need a thing for them to move right in?
If the circumstances are that completing the updates/cosmetic work before listing the house just isn't feasible, the price needs to reflect the current condition of the house, which of course is part of the in depth market analysis. Comparable sales are not just hard data, there's much more behind a sales price, and many times condition of the house plays a major role in affecting the sale of a given property.