I think the debate as to why this happens is being argued from the wrong angle.
One side says Nintendo does this to build the appearance of scarcity and feed off the hype that engenders.
The other side says no one would give up marginal sales to reap the only potential rewards of increased scarcity and hype. Instead that the manufacturing ability simply isn't there to produce up to successful Nintendo product demand.
Then we get a 3rd way argument that claims it's simply incompetence.
It is none of these things. All have some small role to play but the real cause of this, to me, lies much closer to Nintendo's core corporate ideology: No major financial risks.
Nintendo dropped out of the cutting edge hardware competition with home consoles because they didn't want to take on the R&D and initial manufacturing costs due to the inherent risk with that upfront cash outlay.
Nintendo stretched their bill of materials to it's limit with the 3DS trying to catch a blue wave with 3D. It will be their least financially successful handheld simply because they sold it at cost for much of it's life, briefly at a loss, and that despite strong hardware and software sales. Meanwhile the Gameboy printed money for a decade despite multiple higher tech competitors trying and failing to dethrone it and the NDS did the same despite a technologically superior competitor from a major 1st party aligned directly opposed to it and seeing it's later years overlap with the smartphone/tablet explosion.
The Wii was low financial risk and an alternative control scheme and good marketing produced absurd rewards. The Wii U was increased technological risk and (in part due to poor marketing) was a massive bust.
Nintendo simply doesn't believe that increased financial risk results in increased financial reward.
Now if they aren't going to splurge on R&D what is the one other major financial risk a hardware manufacturer takes? Production capacity. It isn't just units sitting on shelves. It's contracts for materials purchases, calculating the economy of scale discount they'll see on those materials, etc..
Does the free hype from scarcity factor in slightly to their decision making process? I'm sure it does.
Does some level of obtuse thinking infect how they gauge market interest for their products? Sure seems like it.
Is there difficulty in raping up production for all small to mid-sized manufacturers? Sure. Nintendo isn't Sony or MS, they simply lack the same scale of production resources.
But ultimately what this boils down to is that Nintendo would rather make 500,000 units and know they'll sell all 500,000 units than make 1,000,000 units and sell 800,000 units, because they paid for those 200,000 and that cost comes directly off the top of the profit made. Expand manufacturing across all product lines and that also incurs substantial operating cost that further reduces profitability and increased risk.
Nintendo is an incredibly conservative company. Their management team recognizes that EAD plus their core IPs are basically a golden goose and their goal is to not over-exploit that golden goose while trying to hit a few home runs on their own along the way. That produces some big boom years and basically no bust years. Sony can afford bust years. Microsoft could afford a bust decade in all other product lines but OS and Office and barely notice. Nintendo has a big war chest but as an overall entity isn't very big and very exposed in today's age of rapid consolidation. Especially in a post-Yamauchi reality where there is no iconic shareholder to shield the company from takeover they simply can't gamble and lose.
