I'm still puzzling over Apple's choice to discontinue the iPad 3 but keep the iPad 2 in production. I'm actually glad about the decision, since that leaves one Apple iDevice with the old-style dock connector. I'm sure that the iPad 2 is cheaper to produce, thus they can sell it for a slightly cheaper price. But if someone is prepared to spend $399 for an iPad, why wouldn't they pony up the extra $100 and get the newest model? It doesn't seem like a big enough difference in price.
Others have commented on this, but I think Apple's full-size lineup make sense. Yeah, it would always be nice if either unit was cheaper, but:
a) Both the CEO and CFO seemed to take a lot of questions on the last two quarterly calls about margins. Tim (and Steve before him) did not want to play this game of selling hardware at manufacturing cost (something other players seem more willing to do). When Apple introduced the pricing of the original iPad, lots of people were surprised and competitors caught off-guard. Perhaps the play for market share in the short term has worked enough warrant some higher markups.
b) I would assume most people would argue the fourth generation iPad (base) is still a good value compared to other things out there. A lot of the complaining comes from a $399 iPad 2, $329 iPad mini, $100 to step up from 16GB to 32GB of storage, etc . . . Maybe Apple was willing to play the lower margin game with the iPad (full size) base models, but not with anything else. So far (iPad mini is untested), that seems to work for customers (growing number) and shareholders (this last month, they have taken a dip, but is anyone will to really bet that the stock will continue downward for long)?
c) I think people who are cost sensitive ($100 is still a lot to certain folks if they consider this a "toy"), who are not very demanding of certain features (Retina, A6X, Siri, better camera, etc), who want the bigger screen, could easily find an iPad 2 at $399 a very good deal. With tax and a smart cover (depending on where you live), it still comes in under $500. For many, that just feels significantly lower than around $600. And if Apple can make higher margins on it, exactly who is it hurting?