Well, I kind of agree with that last point. Free is a good option to get your work downloaded, yes. But are all those downloaders actually reading your book? Also, will they then go on the buy other books you have for sale? However, I don't agree that 99 cents is a price point that "cheapens" readers' opinion of your work. It is a great price for some works.
So here is a pricing model that I have developed. Since I mainly write science fiction I have based the different categories on the Nebula awards categories:
Short story (up to 7,500 words) - .99
Novelette (7,500-17,500) - 1.49
Novella (17,500-40,000) - 1.99
Novel (40,000+ words) - 2.99
Based on that model my current releases Sleep (2,500 words) and Inner Lives (12,000 words) are priced at .99 and 1.49, respectively. I'm still toying with the idea of starting books at a lower price upon release, then upping the price to fit the model.
What do you all think of this pricing model? Would you buy (or have you bought) a short story for .99? Does anyone else have a model that they use? Feel free to comment below!