In terms of similar competitor and ignoring those Cheap VPS, they started the whole $10 and later $5/month price plan. Linode has always maintained its $20 / Node starting price arguing for the exact reason you mentioned, Support Cost. And later DO / Linode became the price plan standards where everyone follows.

I remember at the time I suggested $5 plan should be limited to 1 per account or only for non- public internet facing usage. But the $5 plan made lots of headline and new customers during the growth at all cost stage.

So if $5 plan were really the problem that it was really their own making. Having said all of that I dont think $5 is really their concern. Hardware is cheap, and those plan with vCPU are shared and always over sold. The number of bad actor within the lowest plan are statistically quite small.

I actually think the future should be more like Render[1],

[1] https://render.com