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My understanding is that while a traditional publisher invests its own resources to market and publish a book with the hope of getting enough revenue to cover their costs, vanity publishers charge the author a fee and then the author takes the risk. With the latter, this allows for less regulation in what exactly is being published.

Now I’m sure that, for textbooks covering (reasonably) broad topics, traditional presses exist along side vanity presses.

I also am aware that out there exist some incredibly niche ‘textbooks’ (some might be a bit thinner than a stereotypical textbook due to their niche-ness but fill the same purpose) over a variety of hyper specialized topics in various fields.

For these hyper niche textbooks (let’s say something you wouldn’t read unless you had a graduate level background), the target audience is incredibly small, so are there traditional presses for these kinds of textbooks?

Surely sales on the textbook will be small since the target audience is so small, which means less of an incentive for a traditional press because of less sales. If they don’t use traditional presses, does this force authors for these kinds of textbooks to use vanity presses or is there some kind of special type of press that deals in these? Or do most use self-publishing?

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Traditional publishers definitely publish this kind of book. They're known as "monographs".

Here's an example of a monograph series published by Wiley.

Surely sales on the textbook will be small since the target audience is so small, which means less of an incentive for a traditional press because of less sales.

Yes - these books usually sell a couple of hundred copies at best. It's also why they are so expensive. Even then there's not much profit per monograph. That's partly why publishers are constantly looking for new projects.

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    Research monographs are often sold to university libraries. In many cases a library will have a standing order for all of the books in a series. Commented Dec 25, 2021 at 16:38
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Publishers like Springer, Elsevier, Wiley, De Gruyter, Cambridge University Press, etc. do publish graduate level textbooks. Sales for these books are typically a few thousand copies rather than hundreds of copies.

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Contrary to the assumption in the question and other answers so far, highly specialized academic books are not bought and sold individually. While they are often advertised individually for sale at high prices to the public, that is not how the business works.

In reality, libraries of wealthy universities purchase academic books in bulk at a discount. Academic book publishers sell a certain quantity of books in bulk, and then they find enough book authors to fulfill their sales contracts. The librarian who purchases the books in bulk relies on the publisher's editor to select the books. The librarian does not buy self-published books or books from vanity presses because they only buy in bulk from familiar publishers.

The number of libraries making bulk purchases of books matters. That number is declining. The number of people who want to read an individual book does not, because the buyers are not selecting books one at a time.

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  • highly specialized academic books are not bought and sold individually. - Well, I think this may be changing too. E.g., my library doesn't have standing orders on all the series it used to, and now titles in these series are only individually purchased on request from faculty/students.
    – Kimball
    Commented Dec 26, 2021 at 14:58
  • @Kimball Let me know your experience, but I would expect that if you request a purchase, get an interlibrary loan instead (unless nobody's purchased it and it can't be had that way). Commented Dec 26, 2021 at 15:11
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    No, our library (at a public US university) has money set aside to purchase requested books. If a lot of people make requests, they can't get all of them, but in my experience they have been pretty good about making requested purchases for books still in print. (Though it does take awhile, so ILL is also recommended if you want a copy soon.)
    – Kimball
    Commented Dec 27, 2021 at 1:22
  • Just after WWII, public appreciation of science was at its top, and uni libraries could just describe to any monograph series out there. But over the ensuing decades, the tax payers' willingness to stock uni libraries has declined, and the number of publishers taking the p*ss has grown exponentially...
    – Deipatrous
    Commented Jul 20, 2022 at 7:52
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The answers given are correct. There is a lot more to be said about the topic from both historical and economical perspectives, but let me just highlight one point, which is that traditionally, putting out world quality monographs adds to the academic range of a publisher, which adds to its prestige, even if not a lot of money is made.

If you can only find a vanity publisher for your work, chances just might be that it is not world class, but I do not mean to presume or offend.

It is true that vanity-published work is generally viewed as worthless.

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