Because when you buy it now for $35 right now, you get more for your money than what I got years ago for $25. Even ignoring the additional content and polishing, you're also getting the benefit of all the testing and bug reporting by early adopters, as well as the bug fixing by the developers.

Is that not the opposite? Sure I get less buggy version, but you also have how many years to play compared to me. And you are getting the same game I am when I buy it. You eventually get that content, which one could say is added value to the 25 bucks vs the 35 I spend. You got 10 bucks of content from free essentially.

This is just the wrong mindset. Why would the developer, publisher, valve, or anyone else want to reward you for not buying their product?

It's not the publisher rewarding me. The reward comes from me waiting and getting a cheaper game then those who bought it earlier. As you state

so ideally they would set the price individually for each customer based on the highest amount that customer is willing to pay. Sales after a while are a mechanism for this.

If a game isn't worth X amount of dollars to me then I will wait till the game is Y amount of dollars. If the game never does then I never buy it, meaning the publishers lose, not me.