1. Steam is digital, there is almost no cost associated with "selling" a game, almost everything you sell is profit. Thus, it is somewhat disconnected from standard sales where dropping price too much can hurt you.
2. Steam does not allow you to buy physical games, you can't take a game out of steam. What you are paying for is for game to be added to your digital collection. Collection is a key term here, that what steam sales are all about. In modern times nobody has enough time to play all the good games, but we still want to buy them. I know a bunch of people with huge digital collections on steam.
3. Author seems to be divorced from realities of economies of scale. As things get cheaper, the audience gets wider. Essentially this means putting game into hands of more people.
4. More players is good, steam trading cards means that more players = more sustained profit.