I don't think price has ANYTHING to do with sales of an app, except in the extremes - apps set with unreasonably high prices are not likely to sell overly well.
It's the availability of a free trial/lite version that makes the choice for me. I won't buy software without a trial first. I know Apple isn't making that easy, but that's just how it is, for me. That goes for all platforms, not just iApps*.
If your game is good/fun making a free trial version will spur sales, imo. Sure you might "lose" sales to people who the free version is enough for, but they almost certainly would have never bought the game to begin with (it's like people who pirate movies/music. Yes, they might pirate hundreds, thousands of pieces of media, but that doesn't mean the owner lost those sales - there's very little chance they would have purchased any/many of that media to begin with).
What's more likely is that if the free version is good it will wind up on the top 10 or 25 downloads list, at least for awhile, giving your paid app some publicity as well as incentivizing people to pay for the full version. If your game doesn't lend itself well to being 'split' into a full/lite version then you should consider adding new features to an updated version making that the paid-for/full edition and leave the old as a free/trial version of the game.
Finally, there's also opportunity out there for ad-supported games. If you can't split the game into a full/lite version you could consider a free version with ads in it and a paid one without. You might not see as much revenue from the ads as direct sales, but you might also increase sales through widening your audience which could bring you back to "even".
Good luck!
* I think I'm going to try to coin iApps as being iPhone/iPod touch apps because the latter is too long to type all the time.