Melissa Forster, bestseller author wrote in a terrific blog:
“There is value in listing your book for free, at least for right now there is value. Readers will download your book in droves. Your rankings will soar. Immediately after your free days, at 99 cents you will sell many books, probably about 1000 in three days, equating to $350.
However, you would probably reap at least 1/3 equivalent sales at $2.99, increasing your revenue to 70% while also engaging readers who will think before downloading, which equates to readers who will more likely read your book–you have just added worth to your hard work.”
“Here’s a great fact — not all free and 99 cent books are read. Yet, most $2.99 books and above are read.”
“The difference? The books are not impulse buys, but they’re reasonable enough that readers who are interested in really reading the books will read them. More importantly, you are putting a value on your book, your writing, and your time. You only need to sell 125 books to earn the same $350 at $2.99.”
Read her eye-opening article: http://www.worldliterarycafe.com/content/placing-value-free-marketing
See also an interview with her: http://melissafoster.com/content/over-edge-book-review-interviews-melissa-foster