First note that you're talking about carrier pricing, it's probably better to talk about ACTUAL prices, as what carriers charge is rather irrelevant (as you're paying a lot more over the years, it's just hidden in a whopper bill).
But, I guess my question is, why is the 4" going to be the cheapest? I know that's what they do with some devices, but it would seem to me the 4" and 4.7" could be a similar price if they have feature parity... or, to put it another way, if components cost similar amounts, this is more about size preference than one being an upgrade. For example, maybe the 6s Plus costs more with that screen, but it would be a downgrade for me, not an upgrade. I don't consider it a higher-end model (aside from a couple features).
Yes I'm aware the $0, $99 & $199 are carrier prices. It's just a common shorthand for discussing the tiers. Just add $600 to the price of each, and you'll get the full price. Maybe we can just use A/B/C.
Regardless, the reason the 4" iPhone will always be the cheapest is because of the three sizes, the 4" uses the smallest battery, the smallest screen, less aluminum, and if it's the same thickness (or thinness depending on how you look at it), then it likely will not be able to contain all of the flagship features (like a Taptic Engine). So, that by default means it will actually cost less to build, and therefore can be sold for less, while maintaining the margins.
The 5.5" screen is likewise more expensive because it has a larger screen and battery. Unless you mean to say the slight variation in screen and battery size between the three models does not change the cost of the components at all, and Apple is arbitrarily pricing the different sized phones at different rates. I don't believe that at all.
Hence the 4" phone will always be the cheapest phone of those three sizes (all else being equal). However, since it will fall technologically between the 6S and 7, despite having the cheapest screen and battery, then they can price it above the 6S which has a more expensive screen and battery but last year's tech; but still less then the 6S Plus because that screen and battery surely must offset the the newer tech. Who knows maybe the 6 mini will be priced above the 6S Plus, but I somehow doubt Apple will position it there since the 6 Plus is the same price as the 6S is now.