But the problem is that if if the price drops too low then the company won't be making much money off the game and may not be able to break even.
Well, if you sell 100,000 copies at $50 then you've made $5 million.
However, if you lower the price down to $30 and this spurs sales forward and you sell like a million copies, then you've just made $30 million.
So even though a company makes less money per copy, they will still make more money as a whole due to selling far more copies. Far more people are willing to buy a game at $29,99 than they are at $49.99