Marco Arment, developer of Instapaper, on iPhone App Store pricing:
There are a lot more people than you think that will pay reasonable prices for good software, but most of them don’t leave reviews or send emails. They quietly buy the app and you never hear from them. These people are the market, not the complainers and whiners.
People have always been willing to pay money for valuable software, and users of the iPhone platform are no different. It’s not some crazy new voodoo platform where nobody will pay for anything. Treat it like any other software market, and you’ll see that it responds in the same way.