I'd say that I probably follow the 80/20 principle. About 80% of my ebooks for my Kindle are free or under $3. Maybe 20% are books I've really wanted from certain authors or topics and have been willing to pay a higher price for. I'm definitely reading and buying more books than I did before, so Amazon is still coming out ahead.
I also know that using free books to introduce people to new authors is definitely working for me. I have found several new authors this way that I have liked, and I have bought additional books from. Usually these are the low cost books (under $3).
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