Soccer Dad has been trying to defend the high price of Kosher for Passover food over at his blog, in the face of apparent chest-beating by the New York Office of Consumer Affairs. He asked me to contribute my two cents, so here they are.
Soccer Dad actually touched on most of the high points already, but here are a few more points:
With normal Kosher food, a large chunk of the market is actually non-Jews who are looking for a higher standard of sanitary supervision thn they can get with normal government oversight, or who are trying to avoid "mystery ingredients." Healthy eaters especially like Kosher food. With Kosher for Passover food, this market disappears. Nobody would eat this stuff if they didn't have to. That means a much smaller potential market, hence a need for higher margins.
Moreover, companies have a very short window to sell their merchandise. Again, if it isn't eaten during the holiday, it probably never will be eaten. That means that companies can't simply inventory their surplus stock. It has to go out now or never. Hence, additional risk and the need for higher margins.
Finally, there are a lot more producers of standard Kosher items than there are of Kosher for Passover items. And many Kosher items are mass marketed, for example Hershey bars which have a global consumer base.
But in any event, if you believe that the price of Pesach food is too high, you should see it as an opportunity to make some money. If you can sell food yourself and undercut the prices of the big boys, go for it! You will be rewarded by the cheering multitudes, and with a fattened pocketbook. That's the beauty of a free market. And that is also the test of market prices.