2D Boy blog:

The higher revenue at the lower price point brought about a realization about “price erosion”. The notion that “App Store price erosion is bad for developers” could be a backwards way of looking at things. What is generally referred to as price erosion occurs because developers are optimizing their revenue. If a game earns 50% more revenue at a lower price point, it’s a pure win situation as the developer makes more money AND more people get to enjoy the game. And if those two things are true, does it really matter what the sale price is? If we all charged double for our games we might all earn more money, but we could also end up earning less money because people would buy much fewer apps.