The "I sell a product cheaper than he" game is too old and imo becomes false in the information era. The real game should have been (and actually has been for the past 5 yrs) "my product has more features for the same price than his". Indeed, $199 is much much more expensive than $99, and $849 is astronomical. However, none of us would hesitate to pay $15,000 for a good brand new car and never thinks for a second that $15,000 is 75x more expensive than the new phone. The key here is budget boundary awareness. For every family, there is the phone budget and the car budget. As long as the phone price does not cross the boundary of its conceived budget and the phone does provide more new features, people will happily pay for it, even $849 occasionally. And clearly, few would pay $9,000 for a phone because that has crossed the budget boundary.
I would prefer Apple, Samsung and all others fix their prices of new phones at $200-$500 and compete for costumers with more and better features. And I am glad that seems to be the trend.