Marco Arment on the iPad mini’s lack of Retina display:

Imagine the fallout if a Retina Mini shipped with only three hours of battery life, or was inelegantly thick and heavy. Or, very importantly to the iPad’s market, imagine if its GPUs were slower and it ran existing iPad games extremely poorly. And then add the component-price differences: imagine a Retina iPad Mini that was bulkier, shorter-running, or much slower (or all three) and that started at $399 instead of $329.

That’s why we don’t have a Retina iPad Mini yet. It’s not only about price: it’s because the resulting product would suck in at least two other important ways.

I also believe the lack of Retina display has a lot to do with manufacturing yields. Packing that many pixels into a display that size isn’t easy, and being able to manufacture them at a large enough scale to meet demand is likely something Apple was worried about. But the bottom line is,  if Apple could have released the iPad mini with a Retina display, they would have.