TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Andy Finnell argues that by pricing their applications at 99¢, developers are undervaluing their applications and thus hurting themselves and the nascent iPhone platform. He thinks developers would be better off by increasing their prices.

It’s a smart point. The App Store is still developing, and the current pricing trends are going to solidify soon. Besides the harms Finnell highlights, the most fundamental problem I see in having such low prices is it discourages measured, long term and dedicated development, and encourages quick, cheap-and-dirty development, the opposite of what we see on the Mac.

In that sense, too, I hope application prices shift upwards. I am willing to pay for quality applications, and I think most people are.

Apple should do a few things to help this happen, though. The first is to build in a refund system. Currently there isn’t an official way to refund an application, and that makes it less likely for a customer to try out a more expensive application.

Second is the developers need the option of doing demos. This is another limiting factor — it’s risky to buy a moderately-priced or expensive application, because unless the customer has used it on another iPhone, they don’t have much of an idea how good it is.

No refund option and demos may be fine for 99¢ applications, but that becomes a real issue when most applications costs more than $5. Without these two features, the App Store is not as sustainable as it should be, and quality development is less likely.