I have been playing around with the pricing for Savage Fire, and was convinced to drop the price to 99 cents as a promotion tactic. It hasn't made much difference, as I sold about the same number of copies as I had in the same number of days before that.
But this is where Amazon gets you. Drop the price to 99 cents to compete with all of the other 99 cent books, and your commission drops to 35% instead of 70%. What does that translate to in revenue? Each copy of Savage Fire selling at $2.99 made me a commission of $2.06 on Amazon. Each copy of Savage Fire selling at $0.99 made me a commission of $0.35.
Therefore, six copies sold at $0.99 each would make $2.10, or $0.04 more than one copy at $2.99.
Obviously, there is a value to getting more copies out there, but this is the raw truth behind the differing commissions and the downward price pressure. If more authors would insist on the $2.99 as a floor, that would become more widely accepted by buyers. If everybody races for the bottom price of $0.99, the only one happy is Amazon.
(As an aside, the comparable $0.99 book sold at Smashwords directly brings in $0.56, while the $2.99 book brings in $2.21, so four copies would make more, hardly surprising when the price is three times as much.)