So. HappyDays just put out a video on this subject.
In it he shows off the price increase for unhappy NPCs
Wanna know how much it was?
30%
***THIRTY*** percent (the item he showed normally costs 75 copper, it was marked up to 97)
that's not a minor increase. That's punishing players for not playing the way the devs want us to.
Now, is it probable that the system isn't binary, and that there's some form of scale to it? I'd call it a near certainty. Add that to the fact that Happy showed off a literal worst case "NPC Prison" and it's likely most people won't ever see that level of price hike.
However, I should also point out that its also likely that that price hike ISN'T EVEN THE MAXIMUM, given that the NPC he showed as an example liked its neighbor and thus wasn't likely at maximum unhappiness..
Looks like the naysayers had reason to be worried.