Edit: Haha @Stargazer you handled it quicker thn I did...
Sorryyyy - mussst tyyyype sllllowerrrr...

Actually, the scenario I gave is more or less how piracy would play out IF it were completely accepted by everyone...No games would be sold...
Well, back in the early days (1970s-1990s), it
was accepted by almost everyone. In fact, unauthorised copying (swapping disks, picking up copies at a flea market/car boot sale or whatever) was the major distribution channel. Some of that converted to sales (people wanting the proper manual or in-game extras) and that was enough for companies to grow and prosper.
So I don't accept your vision as being a credible scenario simply because there are enough people decent enough to want to do the right thing - as long as companies don't put these people off (with poor products, customer service or DRM) then they should be able to prosper regardless of filesharing or other "third party" channels.
If I, honest consumer, have to pay for a game, then why is it okay for you or someone else to take it for free? What right do you have to not pay for things like the rest of us?
I do think you're getting the wrong end of the stick here - I paid for D:OS (and since I backed it on KS at a high pledge level, I likely paid more than most) and I don't condone unauthorised duplication.
However it isn't theft and people linking the two (and the one lamebrain who tried to bracket it with rape or murder) are not only exaggerating its impact, but also underrating the suffering of theft victims (the emotional impact of losing a cherished item plus the psychological impact of any related assault).
I realize how the system works. If enough people steal stuff, do you know who winds up paying for it? ME....Prices will raise to deal with lost revenues due to piracy.
I don't think you understand how the system works at all, because "piracy" has resulted in
lower prices so far. Check what discounts Steam offers to Russian purchasers. For contrast, look at the (almost piracy-free) console market - have they been rewarded with lower prices? And this isn't new - ZX Spectrum games were cheaper than their BBC Micro eqivalents, a Commodore 64 game cost less than the same product for an Apple II, Atari ST owners saw lower prices than Amiga users - who in turn had cheaper prices than the (then markedly inferior graphics-wise) IBM PC.
The reason? Prices are set by publishers, who make a judgment call as to what they think the market will bear. A low "piracy" rate therefore translates to a higher price in the absence of other factors. Now however we have Steam's 80-90% sales, the pay-what-you-want bundles and a larger number of budget priced indies, free games and free mods to extend many existing games). So these are likely to push AAA prices down, even if perceptions of piracy don't.