But... the larger the market, the more money I am losing if I sell at a loss.
The example you use is an example of a "loss-leader": you sell something at a loss in order to build user-base and customer loyalty. Microsoft have a huge range of different products to sell, so they let you have one cheap and that gets paid for through you buying others.
This logic doesn't really work so much in the digital world. For physical products, sure, where once the product is created then you still have to produce it, transport it and let the distributor and retailer take their cut.
But for selling something on steam, the only bit that applies is Steam's % of each sale. The concept of losing money on a digital game release is bizarre, for 2 reasons:
1/ The game has already been made and there is nothing more to produce; the distribution is handled by Steam and is built into their cut. Where is the loss? You will probably argue 'wages' but they remain whether the game sells 1 copy or 10 million; they aren't affected by that, they remain an ongoing concern.
2/Presumably some thought went into regional pricing, based on sales projections, and yet the price in Russia is a lot cheaper than in Pakistan. By your rationale, every sale there is at a loss, so why is it on sale in Russia at all, where piracy is a massive issue and I doubt cricket has much impact at all on the national psyche?
The example you quote of MS possibly isn't so much of a loss-leader as it is just responding to the realities of the economy there - you're right that it would be used as a gateway to hopefully people buying more MS products in future - but it is also to try and discourage piracy by making the original product an attractive and affordable option (in the same way that DVDs are stupidly cheap in parts of Asia - relative to the West - to compete with the knock-offs.)
I don't know how much games usually cost in India/Pakistan, but I would have thought it could be a large market and for the sake of the franchise I certainly hope that the pricing is competitive enough to encourage great sales.
