This logic could just as well apply to buying arrows, but I strongly suspect that arrows will continue to cost the same amount in the game as dog prices rise. The reason being that arrows are appropriately statted for their cost.
You know, gizmo33, I think I'm with you in concept -- that is, it's better for a DM to make a house rule that is up front, honest, and makes the price appropriate for the purchase.
Having said that, I think the debate has delved into specifics where it's too grey to get your point across. By that I mean that even if I agree with the foundation of your point, I also think it's entirely plausible and fair for a DM to say that "arrows are appropriately statted for their cost and typical use -- namely, many archers hunting or adventuring as is typical." And thus, there may be no arrow crisis or shortage until there is a war and the DM rules them to be scarce due to the military hoarding. Similarly, if a DM were to say "dogs are appropriately statted for their cost and typical use -- namely, as a poor-man's animal companion rather than as trap-triggers and cannon-fodder" then I'd hardly begrudge him that. The economy even in real life experiences this -- a product is released at a decent price-point for its intended use, and all is well until someone does something unexpected and undermines the business model.
Although it's a poor example, the first one that comes to mind is the
CueCat from a few years ago. It apparently intended to make money by keeping a database of what each CueCat owner scanned & visited, and then selling that database (or access to it) to as many buyers as possible. But then it was discovered that you could hack the CueCat to read standard barcodes without even
talking to the CueCat servers, and suddenly you had a free barcode reader. The CueCat business went to
war against their customers, demanding that they only use the CueCat as intended. Their economic model was based upon expected use. When someone got inventive, the whole model went into a tailspin.
I say that's a bad example because there were other factors, such as the CueCat being a terrible idea in the first place. But that doesn't change the fact that the company did indeed launch a huge fight with its customers, and hyper-fear that their business model was undermined was a pretty big justification for it.
So back to dogs. If I go to the Humane Society today, right now, and want to adopt a dog, they've got 'em. Lots of 'em. But if I start running an illegal dog-fighting business in my basement, and I have to go back to the Humane Society to "adopt" another
hundred dogs to replace all the dead dogs in my basement, well, I've ruined the economic model. People will ask questions, dogs will be "rationed" until they determine that I am a villain who is killing dogs for profit, etc. So if it can happen in the real world, I see no reason why an economic model can't be based upon
expected behavior in the game world. And if a player finds an unexpectedly good use for something that is otherwise not in high demand, then I think it's OK for the DM to say that the economic model didn't fit this purchasing pattern and is collapsing.
Again, I agree with your underlying concept that DMs should tackle these "too good to be true" tricks with forthrightness and honesty. However, this particular specific point of the debate (that dogs must be available for purchase because it's intended that dogs are available for purchase) is much too malleable to make a strong point. Even as a player who could get screwed out of buying a bunch of dogs, I can
still see the DM's logic in limiting it. So, maybe a different tactic for making your point would be good?