You sell your app for 1.99 and get a bunch of customers, who speak to other people and in time sales in this particular market start to slow down considerably. At this point you increase the price to make up for lost revenue on new sales. Then after sales start going under a threshold of popularity, you come out with a free version to appease markets that have been untouched by your project yet, but it also happens to have the massive effect of a new type of consumer that's more concerned with the expected vale vs real money value is now interested in your app. Some of them will buy the 2.99 version, but most will probably not. Then you come out with a sale, and boom it's now in reach for all those people that though 3 dollars was too much. Now you have massive sales and publicity, and when it starts to slow down you're back to increasing the price.

Then comes a time where there are no new markets to exploit, so you build a a new app or a continuation of the old one, a sequel. At this time you also lower the price to 0.99 just to make sure you have the most exposure possible. Only now you have the advantage of past and present publicity and if rightly timed, momentum... And then off course you repeat the formula depending on your market and the viability of your app.