This assumes an infinite market. If you address a market with only 10000 consumers, it's unlikely competition can succeed with prices assuming 100000 sales.
To the point of the original article, smaller companies have a hard time competing due to less reach. That's missing. If I run Disney and can reach 4 billion people, and your 5-person shop can reach 50,000 people, I can either price my product 5 orders of magnitude lower than you, or invest an extra 5 orders of magnitude into development.
That's expensive. If I want to comply with Khazak tax laws, provide support there, and reach distribution channels there, I probably want to pay for an office there. That office might have four people, regardless of whether we sell 1 product or 100 products.
A lot of what app stores do is provide that kind of reach to all businesses, driving pricing down.
Personally, I'm a big fan of government grant funding for free software. It seems like the OS, office suite, video editor, and similar tools ought to have a baseline versions available to anyone for free.
The second company might think there is a market for 100k users, and price accordingly at $10, but only sell 10k copies and go out of business.
Now, however, people see the product as only being worth the lower price point of $10, and won't pay $100 for it anymore. So company A can only sell 1000 copies at $100, and also goes out of business.