Why do you think that a larger screen is objectivly better? It's all about personal preference. I despise those phones with large screens.
If it's a smartphone I would say it's main purpose is to view websites and use apps such as Facetime or equivalent which would be uncomfortable on a small fuzzy screen.
Some day we get the roll-up displays and have scroll like phones with large folding/roll-up screens.
My claim is: 3.5 inch screens are a good compromise, allowing for comfortable browsing, reading and writing. The additional screen space would never be worth the additional bulk (also: uncomfortable one hand use) for me.
That's all about personal preference.
Someone with an iPhone would be used to the "hand feel" of a 4" (101mm) iPhone if the screen bezel were thinner.