One important point that others above have alluded to but haven't outright stated:
While the exponential scaling of rocket equation is an important limiting issue when building larger and larger rockets, for any given rocket (or rocket configuration) the payload capacity is fixed. If you have a payload that is too large for a Falcon 1Pegasus, but doesn't need the full capacity of a Falcon 9, all that extra capacity goes to waste. It costs essentially the same amount to launch a Falcon 9 at 60% capacity as it does to launch it at 90% capacity. You can share payload with multiple customers, but that limits which orbits they can use.
Space X can calculate how much weight the recovery system and fuel requires and how much money they can save by reusing the first stage, and give a discount to customers who give up that additional payload capacity. If there is a market for those lower cost launches, then great. If not, then keep treating the 1st stage as disposable.