Jumping in on the discussion randomly...
Just from craft fairs that I have been to, I would say that lowering prices may not necessarily lower sales. I've definately gone to craft fairs in New York where I couldn't afford anything
- but there were plenty of wealthy people who saw the high prices and were probably impressed by it instead of turned off.
Think about how many people spend $4.50 for a Starbuck Frappamochalattechi
no when they could get coffee for .90c at a deli, or buy $200 designer jeans instead of $15 Walmart jeans!
Of course, finding these people and marketing to them is harder than realizing that they exist....
This site really impresses me in terms of having fair-to-high pricing and completely getting away with it: http://www.lochers.com/