There are 3 types of Application I think:
1. Pure entertainment such as games, Sudoku etc – for the owner of the phone
2. Show off applications to entertain others – something you can show your friends “Hey check this out”
3. Productivity/business type applications.
The pricing of (1) is dependent on how many minutes in the persons life your app is going to fill.
The pricing of (2) is $0.99 almost without fail
The pricing of (3) is dependant on
a/ how much time you will save the user.
b/ how much money you will save the user
Most importantly – ALL of the above are dependent on the PERCEPTION of those values that a user has when they front up to buy the application.
Since there is no try before you buy system – and I doubt there ever will be – users make their decision (and developers earn their income) based on a screenshot, a bit of text and some reviews.
Copywriting is as important as the code!