I think your prices are fine for a bazaar. I most certainly would NOT lower to what your friend is suggesting. If you are not going to profit, then what is the point of making/selling? Personally, I think you could still go up 10$ on each size.
In thinking about bazaars and craft shows...I am always willing to pay $$ for something that is well made...even when I say I could make it myself the real question is, would I ever make it. At holiday time, I am doing my Xmas shopping. When I go to a holiday bazaar I take cash with me. I make one circuit around to see what all there is to see then I go back and do my purchasing. That way I do not spend it early and wish I had saved for something else. Many people I know on a budget do the very same thing.
You may have some people who are interested in your bags but do not have the funds (at the moment). You might make up some business cards so people can contact you later when they realize that they really wish they had purchased a bag.
As for Vera Bradley bags...everyone carries them and most people do not think twice about their cost. I love making my bow-tucks bags (and carrying them) because they are one of a kind and I always get compliments on them. I do carry Vera bags, as well...in fact, I just purchased one of the brand-new fall line bags.