I think anyone should have the right to retire anytime they want.
That said, Bisping's argument is logically sound. Diaz just beat an ELITE striker (Anthony Pettis). I don't think that just because he got the living shit beat out of him by Masvidal (who's now probably top tier at Welterweight), that he should just exit the game like that. I'm not even a huge fan of Diaz but I logically think that he could beat lots of people still. And because Diaz is so PPV friendly, he could make enormous amounts of money if he fights smart.
Also, I don't how how much weight he cuts, but if he can, I think he should probably go to Lightweight. Then again I really don't know how heavy he is.