The price of the iPhone, if anything has remained constant or been reduced via subsidies. Replacement iPhones are mass produced just as NIB iPhones are produced. A replacement is something that Apple has foreseen since day one of its design and implementation or distribution.
A recessed glass can cause more problems than any iPhone owner would want; I for one, would not like all the dust and lint to get into the crevices caused by the uneven or recessed glass. I've taken my iPhone back to Apple for just that reason, and after paying $599 for my v1 iPhone, I definitely do not want a defective iPhone in my possession. Resale is another concern for not wanting a recessed glass iPhone. Just too many headaches for the iPhone owner. Bottom line, Apple needs to quit making bad iPhones or allowing unsatisfactory iPhones to make it to market....