Not true. The iPhone 4 is now cheaper and the 3GS more so. Where Apple does not reduce the price is where they keep the product name and refresh the hardware, like desktops. This small product range model is the main driving force behind Apple's strategy.
When you compare apple hardware in the earliest phase of this cycle it is extremely competitive and others find it hard to match the price. However towards the end of the cycle it is comparably expensive. Apple almos certainly budget based on this cycle. Their customers are not confused by older models still in the supply chain and at no time are they a complete rip off.