The reason for the retro game market is due to supply and demand, like any other market. However, to say that without qualifying it is a far too simplistic assessment of the situation. We must look at the reasons for the demand to try to predict which way prices will go in the future.
I believe that there is a retro games bubble, and that it will crash sharply at some point in the future. The reasons as to why prices have risen up until now are twofold: nostalgic thirty-somethings and speculation.
The former group are likely to lose interest as time goes on. In fact, given how long it has been since prices began to skyrocket, it is likely that a significant number already have. Rising prices will contribute to said loss of interest, as people will have more important things to spend money on than a €60 copy of Megaman. Most importantly, there will not be a sufficient number of younger people interested in retro games to replace those who have left the market.
The latter group, the resellers in it for the money, will leave the market next. This will be for two reasons:
First, flea market/garage sale finds will eventually be so rare that they will be unable to find a steady supply of retro games to flip. Remember, as resellers so often like to say, supply is limited, and that includes the supply of games from uninformed sellers.
Second, as prices rise, the amount of people willing to buy at those prices falls. Eventually, resellers won't be able to sell games for months at a time, partially because most nostalgic gamers have left the market. Resellers will begin to sell, slowly at first, then quicker as more resellers begin to notice that the trend is now to sell, and will want to make as much money as they can on their investment.
While this will mean that prices for common games will be cheap again, an unfortunate side effect is that games will be thrown out by resellers. Games that are genuinely rare will increase in value even after the crash.