FWIW:
http://www.next-gen.biz/features/val...-too-expensive
"Discounting games does not only increase unit sales--it increases actual revenues. During the 16-day sale window over the holidays, third-parties were given a choice as to how severely they would discount their games. Those that discounted their games by 10 percent saw a 35% uptick in sales--that's dollars, not units. A 25 percent discount meant a 245 percent increase in sales. Dropping the price by 50 percent meant a sales increase of 320 percent. And a 75 percent decrease in the price point generated a 1,470 percent increase in sales."
Of course, it helps if people actually know you exist, (ie, Steam has a much higher profile than Shrapnel) - that's where advertising comes in.