In most countries there are laws against being anti competitive. What that means is that you cannot open up a gas station and sell gas for 1/2 price at a loss. Even if you business plan was to sell more soft drinks and chocolate bars you still can't do that.
Behind most competition acts is an understanding that you can't start a business to ruin somebody else. Often times big companies get a accused of this and a huge legal battle begins. Generally if you want to sell something there is always a bottom line which you cannot go below otherwise you lose money and it isn't a business.
But when it comes to selling software anti competition sentiments seem to not matter at all. From a small business point of view if you are not selling your software for at least 10 dollars you will be losing money. It's really hard to make money off of 1 dollar apps and it is even more challenging to make money off of freemium.