Totally agree that most consumers are honest people who will pay a fair price for their goods. I also agree that every business factors into the cost of their goods or services losses due to theft/piracy.
Artificially inflating prices though will only drive more people to piracy. Like the computer games industry here in Australia. We are paying up to $120 for an Xbox 360 or playstation 3 game. Even when the AUD was near parity with the USD we were still paying that price. Totally ridiculous but when you take into account that we can't buy games from overseas because the "zoning" or whatever it is will ensure they don't work here you can see why distributors feel they can get away with those kinds of rip off prices. Then they wonder why many people go out and pirates the games instead.
The sooner publishers move into the 21st century the better it will be for them and the consumer both in my opinion.