They key is that they have to sell everything they make. Unsold copies are bad for any business, but it's a killer for a small company. In a perfect world, they would match the supply to the demand. Since that's nearly impossible, they are better off selling a smaller number of copies and knowing that all will sell, than to make too many have to sit on leftover stock.
That doesn't mean LRG always gets the production numbers within a reasonable % of the demand. Night Trap on PS4 was a good example of that. The production run was well below what the demand turned out to be. They could have made a lot more money if they had correctly anticipated the demand. But at the time, they were still too new to take that kind of risk. That's part of the reason why they have been slowly switching over to more pre-orders. I think they will continue to move in this direction, especially once the Vita games are gone.