It's because a monopoly exists. Standard neoclassical economic theory is based on the assumption that competitors are free to enter the market...
I take it you view the market as "the Civilization 5 market"? If that's the case, then sure, Firaxis definitely has a monopoly on terms of sale of Civilization 5. However, I think this is a bit shortsighted. A more reasonable market to consider is the "video games market" or, perhaps, the more restrictive "PC games market." There is significant competition within these markets. As a consumer, if I'm dissatisfied with Civ5, then I can easily find another game, whether it be Victoria 2 on my PC or New Super Mario Brothers on my Wii or whatever, to purchase as a substitute. There is no monopoly in the video game industry.
Indeed, there isn't even a market in the digital distribution of PC games. Steam and D2D offer competing and substitutable services. If, as a consumer, I don't want to purchase the game from D2D, I can purchase it from Steam, and vice versa. I can even order it from Amazon or go buy it from Walmart or wherever if I prefer. No one distribution channel has a monopoly on the sale of Civ5.
which under assumptions of a free market will eventually lead to an equilibrium where unit prices are equal to the sum of worker salaries for producing one unit (although unfortunately, every country in the world today practices some form of capitalism, which is antithetical to the free market, so this doesn't actually happen in the real world).
Um, this isn't free market, or neoclassical economic, theory. This is the labor theory of value, a fundamentally different economic theory. Neoclassical economics holds that in a perfectly efficient market the price will settle at the highest point that consumers are willing to pay for the product. If that point is lower than the lowest point at which producers are willing to sell the product, then the product won't be produced. Of course, there are all sort of critiques of this theory, starting the problem of assuming that markets are efficient.
By using the threat of violence (in the form of action by the governments) to prevent new venues from offering the product, the producer is able to control the supply curve,
Again, I don't think it's useful to consider "the Civ5 market." Consumers have a myriad of options to substitute for Civ5 if they wish.
so that the price of the item is set by demand only, so reducing production costs won't really tend to affect sales price. Many people thought that the prices of CDs would be lower than the costs of vinyl due to This applies to books as well as video games, but in most cases people are more flexible about what books they read: if one book costs significantly more than another similar book, I may choose to buy the cheaper one. Since the game market is smaller, this effect is less pronounced (because there isn't really a similar competitor to a game like Civ V, except perhaps Civ IV).
I suppose that if your demand for Civ5 were completely inelastic, then this would make sense. But who's demand for Civ5 is really completely inelastic? I imagine that most of us, if something about Civ5 bothered us too much, would be able to find reasonable alternatives. Perhaps we would spend our time and money on other PC strategy games such as Europa Universalis 3 or Sim City or Galactic Civilization. Or perhaps our demand isn't necessarilly for strategy games, but is for PC games generally, in which case we may choose Dragon's Age or the Sims. Or perhaps our demeand isn't necessarially for PC games, but for video games generally, in which case we may choose Zelda or Grand Theft Auto or something. We could even look at it in terms of a broader entertainment market, in which case Civ 5 competes with products as varied as comic books, DVDs, board gams, D&D, and a weekend trip to the lake.
As for the original question, it's pretty straitforward. Bob_page hit the nail on the head. Digital copies of the game cost as much as physical copies because enough consumers will pay the same for a digital copy as a physical copy to make it worthwhile to the publisher and distributors for them to cost that much. If that weren't the case, or if in the future that ceases to be the case, then the price will drop until it either gets low enough to entice enough buyers to download their games, or it gets so low that it doesn't make sense for the publisher or distributor to continue to offer games as digital downloads.
The extra costs incurred by physical distribution - the packaging and physical manual and game disc and shipping and stocking and such - really don't factor into the pricing decisions at all. Taking those into account probably gives the publisher some wiggle room to lower prices if the market calls for it, but they don't really come into play when setting the initial price.
It's probably also worth pointing out that there are extra costs incurred by digital distribution - servers and bandwidth and such - that don't apply to physical distribution. It seems reasonable to me to assume that the extra costs peculiar to digital distribution are less than those unique to physical distribution, but that's just an assumption on my part.
Regarding digital editions of books, the current lower prices for digital editions comes from two things: 1) a coup by Amazon.com, in which they ordered a large number of licenses at wholesale prices without telling the publishers what price they'd be offering them at, which has tended to bring prices for digital editions down in general due to competitive forces, and 2) the fact that a large and growing number of digital editions are provided directly by small authors rather than through the traditional publishing distribution system, which cuts out the extra middleman to pay.
I think you're spot on here.
