You are right..
.. Yes, if iPhone prices are dropped actually most of the other phones will not sell at all.. (well, the geeks and nerds - and me too ) will still get one of the others - androids, win-phos etc..
Mythical Reasons for people happy to stay with iPhone --
1. Reliability - It is half a myth.. You drop it once and the glass shatters before you can take a breath.. Regardless of the app test team doing a great job, apps still fail and crash and stay unresponsive etc.. One only has to look at Apple forums for complaints..
2. Apps & Games -- Again at this stage it is half a myth..--- You get angry birds free and also at HD resolution in a bigger screen in Android and loads of other games in all devices (heck, I got angry birds HD in my touchpad and angry birds in pre3! A system that is DOA in its truest sense..) A number of games are still uniquely iPhone/iPad -- monopoly comes to mind.. (Primary reason for me to leave iPhone - spent so much time on monopoly that the only way I can cure my addiction was to sell it and go away from it)
Real reasons why people are staying with iPhone (iPad ) --
1. Intuitive and Ease of use - The interface is really good (atleast from 3G onwards) and very usable.. No need to read the manual. (except in some cases.. compare that to playbook where I was waiting in Dixons for 10 minutes to find how to get out of the photo app)
2. Walled Garden + Addiction -- Yes.. People stay inside the garden as long as they are well fed and watered.. Let me list them out..
a) you can buy almost all the software for small change and you cna download the same in all devices you use (with the same apple id)
b) You can buy all media (songs and videos) / rent videos for small change again.. and they are available in all devices you use (with the same apple id)
c) once you have developed addiction to the games and apps and also built up a sizeable chunk of digital assets in Apple Stores, you cannot leave the platform without losing them as well. And that can make a grown man shake and weep.. Addiction is very difficult to cure..
The one place where Apple still not delivering was iTunes (the only product of recent times from them to be absolutely hated even by fanboys) and as that is sorted now with the iCloud, most of the customers will NEVER EVER think about leaving iPhone / iPad products..
And those customers will upgrade every time a new iPhone comes out and the pre-orders will be more than a million easily.. I am looking forward to the next iPhone release when all 18 million iPhone users all apply for upgrade on the same day.. There is no guarantee it will not happen..
If and only if M$oft delivered something similar on the win phones by version 6 there may be some difference. But they had no clue, absolutely none.. No one else was in the picture then and no one else now to keep the customers in such a stranglehold..