There are two cons to the .99 book. The first one is that some people think you are showing the reader that you don't value your book. Personally, I think this is a silly concept. It never even occurred to me to think that way until I read it on several blogs. The second con is that you only receive 35% on .99. Therefore, I make a LOT more money on the books that sell for 2.99. I know a lot of people who say that they'd rather sell less and make more. That's their choice.
The reason I originally went with .99 is that I thought a reader is taking a risk on an unknown author when they buy my book. Far more readers are going to make that choice when the risk to their pocketbook is less. By book two, I figure that I'm no longer an unknown author, and thus the price of book two. Originally, I sold more of Wild Montana Sky than Starry Montana Sky--about 5 or 6 to 1. Gradually Starry crept up until it was 2 or 3 to 1. For example, yesterday, I sold 187 copies of Wild Montana Sky and 74 of Starry Montana Sky. A good day for both books.
Having more sales, even though I don't make much money on them (although still more than I'd make per traditionally published book) resulted in more sales. Higher sales resulted in a better sales ranking and in my making Amazon top 100 lists. Being on those lists sold more books. About a month later, Starry Montana Sky ended up on the top lists, too. As I write this, Wild Montana Sky is ranked #217 in the Kindle Store. And #5 #6 #9 on several lists that end in Historical or Historical Romance. Starry Montana Sky is ranked at #751 in the Kindle Store, and #2, #32, #32 on different lists.
Having a .99 book also has caught the attention of some bloggers who look for cheap books. It hasn't gotten a lot of attention, but has gotten some.
If you are a popular author who is publishing your backlist, then you might not need to have a .99 book. However, you might still do it to draw in new readers.
One of my friends, Jacqueline Diamond, has written contemporaries for Harlequin for as long as I've known her. However, she has an extensive backlist of Regencies and a few other genres that I've happily been reading. After a few months with disappointing sales, she followed my example and her sales have picked up.
The nice thing about self-published ebooks is that you pick the price and it's not set in stone. You can play around with the price and see what works. You can try a .99 book to see if it jump starts your sales, but after a few weeks or months, raise the price.
The more books you have published, the more you can experiment. So keep writing!