An important thing to keep in mind is that #1 here is the state of the affairs after the fact, i.e., when people can see many games that are apparently free built using the IAP concept.

Dan Ariely noted that the mobile app industry has done this to itself by ... well better read in his own words: http://danariely.com/2011/12/25/the-oatmeal-this-is-how-i-fe...