Price is rarely a good indication of actual manufacturing cost or actual value. This is true for all consumer products, including headphones. Likewise,
MSRP is not a valid metric for judging the quality of a product. Price is frequently set for a product based on the perceived value to the consumer, or to place a given product in a target market. All manufacturers of all products price their goods according to the market. Headphone makers are no exception. The TH500RP and T50RP (actually T20RP would be a more valid comparison since it is an open headphone like the TH500RP) are a good examples. The T50RP and its siblings are clearly priced to sell in volume, and to be an entry level purchase for the Fostex line. Even those dedicated to their T50RP's will not argue that these are the best headphones available at any price. But, for the money spent they are a good value to most. Fostex purposely put the TH500RP in the upper middle of the market, and substantiated this placement with improved sonic qualities, high end design and materials, superior comfort, and superior build quality when compared to the T20/40/50RP. I believe that the original $699 MSRP put it in the same league as the TH600, but below the TH900. I would argue that this price was appropriate for the market they were trying to enter and the pricing of the competition...
...but it was too high for me.
With the recent reduced price for the TH500RP, I now see it as a viable alternative, and an all too rare opportunity for me (and others) to obtain a headphone that normally resides n a part of the market where I do not live. Clearly, for someone able to afford TOTL Audeze, etc. this price is irrelevant. To me it is relevant and matches the perceived vaue. I do not know if this is a good headphone for $699...I have nothing in my collection to compare it to. But I can say for certain that I am enjoying the hell out of them.
@Florimer, I am also curious to know which Fostex headphones you have actually heard.