A while back I was trying to find the best PDF reader for my Android tablet that would allow me to review papers including putting annotations on the PDFs and syncing the documents to and from either my computer or a reasonable cloud service.
What came out was a bit surprising. There were many different readers, ranging from free to $10, but by far the most useful one from my point of view (ezPDF) was only $3 and this got me thinking. App stores further reinforce winner-take-all tendencies because if one application has 3x the users of another, they can afford to price it at 1/3 the price. (Obviously, assuming that the development efforts cost similar amounts.)
To a degree, this inhibits innovation since a new application will have a much smaller install base. This is different from how other software was commonly sold where prices were more or less fixed somewhere between $30 and $50 with no real “discount” for popular apps.
Still, it’s not clear if this inhibition is stronger or weaker than the generally decreased barrier to entry which the app store model provides to new applications both by breaking up functionality into smaller pieces that and by providing a clear mechanism to discover competitors.
It will be interesting to see how it all plays out and also to see how software pricing evolves in this model.