Its really not the business model, its the underlying assumptions. I am not much of an economist but at least part of the answer lies in elasticity of demand. At some point, the guest price becomes too high and rounds are reduced to such an extent that the increased revenue per round does not offset the lost revenue caused by decreased play. Using Tom's example, if doubling the fees causes the rounds to be reduced by more than 50%,there is an immediate loss in revenue. If you couple that with an increased maintenance budget, the lines cross even sooner. But based on my experience with private clubs, the desire for immaculate conditioning is not generated by a desire to draw guests, rather it is the members'desire to provide themselves with an experience that rivals the best clubs in their area. "Keeping up with the Jones'" is a real factor. It may increase when clubs are competing for a diminishing pool of members.
I also agree that, at least for most private clubs, the margins on the ancillary sales, particularly food and beverage, are so thin that they do not drive these decisions with the possible exception of the bar.
Part of the decision making process reflects a portion of Pat's post. While members want to bring guests, they also want to be able to play the course at convenient times. Hence restrictions on when guests are welcome and, in some clubs, fees that are high enough to compensate for any inconvenience to other members.