Yes, Scarcity does play a role. definitely. But that is also tied in with demand. A product that someone already values, if it becomes scarce, its demand to that person might increase. But someone who doesn't value the product to begin with, scarcity of it is unlikely to increase his demand for it.

Yet people are willing to pay it

Right there is the freedom of people to decide value. It might be a failing business, it might be losing money, but as long as someone sees value in it, it is worth something. This part is actually already very well explained by Azircon dada in the reply to this comment.

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