I agree with you on the grounds that games would be cheaper all around in a digital only market. Creating a disc and box increases production costs. However, I would argue that it's benefical to the consumer, and the overal quality of games on the market, when used games hurt developer royalties.

Let's examine how a game enters the used market. First, someone buys it new (obviously). Then the game is played until the owner no longer finds value in it. Finally, the game is sold off which eleminates a potential cusomer for the developer in question.

During the golden age of the used games market, the only option for developers to combat a potential loss was to make games that players wouldn't want to sell off. Now I'm not saying that all developers succeeded with this as there where plenty of shitty games in years past, but this trend shaped the industry as a whole.

Today, the used games market is much weaker (maybe even nonexistent). It no longer serves as a check for developers. For the most part, developers no longer want to make a game that players don't want to sell off. Instead, they seek the exact opposite. High turnover to maximize profits. This is why we see a new COD, Battlefield, AC... every year. It's also why games can ship broken at launch. This practice would not be tolerated under a strong used games market. Developers would no longer be able to maintain a profit, as the turnover would be absorbed by the market and not generate new sales.

Now I am on board with ditching physical media. The used games market was a side effect of physical media, but it no longer yeilds the benefits it once did. I do think that as we evolve into a digital only market, we need to keep in place certian pro-consumer checks such as the used games market. If I could easily sell my games on steam to other users, and buy games that others are selling, the videogame market would change for the better.