Why Does the iPhone Price Remain Constant for 12 Months While Other Smartphone Prices Drop?

Why all smartphones are $199

Many popular smartphones including the 16GB iPhone 4 and various Android phones are often priced at $199 with at associated 2-year contract. David notes that carriers often price smartphones precisely at $199 and do not price phones in small increments above or below it to avoid the perception that phones are a little better or worse. He notes that there are less expensive smartphones. In fact, a quick check shows that there are several smartphones that are free with 2-year contracts.

The question that he doesn’t ask and answer is potentially more interesting: Why do all smartphones except for the iPhone tend to have dramatic price drops just months after their release? And, conversely, why doesn’t the iPhone have that same pricing trend? There are, I believe, a couple of factors involved.

First,