You don't think Apple researched this before releasing the 6/6+ last year?
If there was such strong demand for a 4 inch premium phone they would have never stopped making them.
Android had well over a year to make a 4 inch premium phone to fill the niche left open by Apple. But NONE of them are. So are you telling me Android makers and Apple are ALL WRONG?
Bottom line is there are very few who will spend premium dollars for a 4 inch phone. Deal with it. The world has changed. This is as idiotic as saying there is strong demand for a 3.5 inch premium phone. The world has changed.
Apple is researching all the time. This is Apple marketing at its best. And that's all that can be said about the current state of affairs at the moment.
Apple made the decision to compete with Android, despite years of ridiculing their "phablet" phones and mini tablets. So now Apple jumps into the market, while at the same time introducing a brand new product designed to be used with the iPhone, which would make having a larger iPhone even easier -- the Watch. Moreover, Apple needs to guarantee they will sell phones to cover the R&D and manufacture startup of the iPhone 6 -- what better way than to force customers to buy them by only offering the new phone and features in one of two new sizes. Guarantees that only diehard smaller phone users will not upgrade, and that alone gives Apple some very important real world data they didn't have before. Then they wait to introduce the smaller form factor as soon as their other major priorities are behind them: Watch, Force Touch, iPad Pro, Apple Pencil, ATV 4. Then upgraded 4" iPhone. In much the same way as the iPad mini 3 wasn't much more than a facelift from the previous generation, and there is no iPad Air 3 this year. Regardless, the rumored phone seems unlikely to be as crippled as the 5C, and the 5S is still holding its own. Only once Apple gets this phone on the market will they know how many current 6 users will drop down to a smaller phone when they upgrade, but I suspect they already have a pretty good idea, as you suggest. Depending on how that plays out in the real world will determine their course of action going forward.
This sweeping generalization that the world has changed and everybody wants to carry a giant screen in their bag, or stuffed somehow in their pants, is a bit of a stretch. The specious reasoning that Android stopped making a premium 4 inch phone seems pretty typical of their behavior ... if Apple isn't doing it, they don't need to do it. They're making a fine living off selling giant phones which they pioneered. Give them time, if Apple doesn't release a 4" phone, Android may just see the same opportunity to differentiate themselves from Apple as they did with Phablets and mini-tablets, and now round watches, and edgeless phones. It's not like Phablets appeared overnight after the original iPhone launched. It took a while, first copying, then throwing every concept they could at the wall, until they found one that stuck.
The pendulum aways swings two ways, and it's only a matter of time before general use patterns change, and Apple catches Android off guard yet again.