I'd argue it's not just the lack of paid upgrades, but also the inability to do trials and/or (easy) refunds. I think the absolute glut of "free with almost all functionality as in-app purchases" style apps speaks to the demand for trials.

The lack of an ability to trial iOS software with no financial risk means that the risk of purchasing crappy software is priced in to the amount people are willing to pay. Think of it as a weird sort of reverse insurance. Every iOS software developer is "paying" (via lower prices) customers for insurance against crappy software and, unfortunately, there is a lot of crappy software, so the premiums are sky-high.