I agree with the first part (not that it should mean they can just extract more money out of us), but the second part is something I simply don't believe.

Don't get me wrong, I know budgets have increased, but the dev cost definitely didn't by remotely the same amount. Devs wages are pretty stagnant since the initial silicon Valley boom and new tools at our disposal have made it a lot easier to create games, be it for indi devs or the corporate giants. Sure, graphics got fancier, but so did the readily aviable stock assets. High end work stations cost maybe a bit more, but they are a drop in the bucket in the 100+ million budgets of today.

What has increased on the other hand is the amount of executives/managers and their wages. In addition to that marketing has gone up a lot, probably over half of most budgets go there. The growing corporate overhead with its archaic structures also eats up a lot.

If we go purely by dev cost, prices should go down since the overall profit would increase with the greater amount of players. Everything else is corporate overlords throwing shitloads of money at a mediocre game to make it seem worth something.

Have production costs increased or has marketing/publishing costs gone up dramatically as gaming attempts to get a greater demographic and introduce predatory monetisation methods? Tools and techniques for game development surely improve over time making development easier and more cost effective.

Market size has also gone up. 30 years ago and selling a million copies is mind-blowing. Today it's on the lower end of big game launch. Lower profit per unit, but many more units sold which really helps balance out the difference.