Because the studios are greedy, and (for now) people are buying them.

A cassette tape costs more to manufacture than a CD, but CDs cost more because there's a higher perceived value (digital sound, easy cueing, etc.) so the record companies charge more (and people keep buying the things). Same principle applies to VHS and DVD, with a couple of additions:

-Making a DVD (menus, digital transfer, extras) does cost money above what VHS releases cost them. Duplication costs are probably comparable now, but will favor DVD as costs come down for multi-layer discs and the storage cases.
-Studios are trying to have their cash cows (VHS) and eat them, too (DVD).

Would they be better off promoting the heck out of DVD? Maybe. But even if that's true, studios do not have a good track record of acting in their own best interest - just look at VHS. When the format first surfaced Hollywood actually sued to try to kill it.