The problem with that logic, as much as I'd like to believe it, is that customers seem to be very happy to pay >5$ after "buying" the "free" game in IAP. And because "free"+IAP is the norm these days, customers scoff at expensive games. Why pay 5$ if you can get another one for "free"?

I'd much prefer the free demo + paid full version to be honest as I'd like to see if a game is worth it. If it is, I'm happy to pay a decent price. Then again, I might be a minority.