If the contents of the bag are worth $500 the airline isn't spending >$500 worth of effort to track it down and return it to its owner. It makes sense to just reimburse them and move on.

Now the question is what happens to the bag floating in the ether. Option 1 is sending it to a landfill. Option 2 is cracking it open and reselling/reusing the stuff in it. There are plenty of ethical arguments in either one's favor, but it isn't as obvious as everyone is making it seem.