Hypothetically if we say SEGA and Nintendo were the only ones in play today, we would have even less competition. Video games would most likely be even more expensive games as they are now. Games back in 5th gen were expensive even without inflation taken into consideration. Iirc PS1 games were around $50 or £45 for new games. SNES games ranged from $60 some going to $100. Megadrive games were around $60. I remember reading somewhere that Nintendo's margins per game on SNES was pretty darn high hence why a lot of publishers jumped ship.
You are comparing cartridge prices to disc prices. Sega was already moving away from cartridges before the PlayStation. Sega had created the Sega CD add-on for the Sega Genesis/Megadrive. Their next console release, the Sega Saturn, was fully disc based. Nintendo was also taking steps to move away from cartridges, but was taking a much slower, more cautious approach. Nintendo's first steps towards a disc based system led to the creations of both the Sony PlayStation and the Phillips CD-i. I don't know why you would assume that Sega in particular would have retained a high price point for disc based media, when we already have historical evidence to the contrary.
Madden 97 SNES: $59.99 (cartridge)
Madden 97 Sega Genesis: $59.99 (cartridge)
Madden 97 Sega Saturn: $47.99 (disc)
Madden 97 PlayStation: $47.99 (disc)
Prices from 1996 Toys R Us catalouge.