Price is one of the emotional factors to be overcome in making a sale. I have read many times that humans make purchases based on emotion and then use logic to rationalize the purchase.
Pricing is an important issue for self-published authors as we struggle to earn a living or pay bills with the extra income derived from our publishing efforts.
The trick, so to speak, is to price for maximum net profit. This is a careful balance between generating the maximum number of sales and earning the largest TOTAL profit possible.
Some authors want to set as high a list price as possible believing this will generate the greatest amount of total net profit. Other authors set a lower list price to increase sales and use volume to generate the highest possible net profit.
For those who want to see further examples of this math and logic behind this model, I suggest visiting J.A. Konrath's blog, A Newbie's Guide to Publishing and searching his archives as Konrath has written extensively about this topic.
One principle I will share from Konrath's blog is he believes strongly in find the the right price point that will generate the greatest volume of sales and this will result in the largest net profit possible. Konrath as the sales and the data to back this up and he shares it from time to time on his blog.
Amazon allows authors to set their own list price and the share of the sale the author will receive is based on guidelines established by Amazon. Some of these guidelines are shown below and come from Amazon.
If you wish to see the complete set of pricing guidelines for Amazon click on Amazon Pricing Page.