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This is pretty interesting, but I think you need a lot more data to see when this applies.
I would not be surprised if this rule applied to most self-pubbed books. I think that there is a general unwillingness to pay $9.99 for most self-pubbed books, and you really could see a large increase in sales by dropping the price to $2.99. However, part of this effect is accounted for by the fact that $2.99 is generally regarded as a standard price for most self-pubbed books, with $9.99 being pretty expensive. I think you might see an even more extreme example with books from BPHs being priced at $29.99 vs. $9.99 - but that would have a lot to do with the fact that $29.99 is kind of beyond the pale for normal fiction, even from a BPH.
The more interesting question, though, is whether a book from a BPH would increase its sales six-fold if it went from $9.99 to $2.99. In most cases, I'm skeptical that it would - I certainly don't think that James Patterson or Stephen King would sextuple their sales by dropping their prices. (The issue is also complicated by the fact that BPHs have fixed costs for editing, etc. associated with the books, so everything left over after the retailer's cut isn't profit...)
Finally, the other complicating issue for sellers is maximizing your income, which may be best accomplished by setting multiple price points over time. I.e., if you can sell 1,000 books at $10 or 6,000 books at $3, your best approach is not necessarily to price your book at $3. The best approach is likely to price your books at $10 until you've captured the people who are willing to pay $10 for the book. (1,000 people). Then price your books at $6 to capture the people who are not willing to pay $10 for the book but who will pay $6 for the book (say 2,000). Finally, price your book at $3 to capture the remaining people who were willing to pay $3 for the book (3,000 people).
Total revenues with this model are ($10x1,000) + ($6x2,000) + ($3x3,000) = 10,000 + 12,000 + 9,000 = $31,000 in revenue. Much better than $18,000 in revenue you would get by pricing the book at $3 to begin with.
Obviously, this is just a model; and of course it may be hard to know when you should drop your prices. But, clearly, the corollary to the idea that you can sextuple your sales by dropping prices by 1/3 is the fact that 1/6 of your customers would have paid 3x as much for the book.
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