I know jack shit about economics or how these things really work. Probably mostly because I don't care that much ... I've never been a money or math guy. Regardless, I suspect the reason this kind of perspective persists is because Nintendo does it with practically everything. Their hardware and games are both always in short supply, seemingly without fail. You could indeed say that they're conservative and trying to be smart, but when there's always more demand for most of their products than they ever actually meet, one could argue it's actually not very smart at all, and that their conservative outlook has been costing them sales for decades. Or that it's an attempt to produce a limited supply of everything and ensure they sell 100% of it, regardless of how many consumers are left out, which may not exactly be the same as intentional undersupply to create demand, but ... kind of? If everyone knows this is what your company does, you're ensured a big rush on your stuff when it's released, meaning you sell out well before you're discounting stuff to lower prices to move product sitting on shelves too long.
Either way, it confuses me. There are a ton of their games I would have bought but never did because there was no supply by the time I was ready, and I sure as shit wasn't paying inflated ebay prices. I actually would have bought a Switch on impulse (a questionable decision, but one I was ready to make at one point) if there actually were any to buy, but that time has passed on, and it's very unlikely that I'll ever even consider it at this point. This is why I skipped the N64, a lot of the Gamecube, GBA, DS, and Wii libraries, the Wii U entirely, and now the Switch.
Don't most companies see demand like this and take steps to meet it, conservative or not? Nintendo isn't nobody. They have resources and could develop new partners for producing stuff, they just choose not to. Are they not just leaving money on the table with the NES Classic, which would clearly still be selling if they bothered to do even another limited run?
