One of my apps is called "Calculate" [1] which has you solving maths problems. There is always a solution which you can view. You start off with ten solutions and when you run out you can IAP more.
I recently played a game called "Pocket Rally". Download was free, but after the first few levels you had to pay to upgrade to the full version, which I did.
"Calculate" has zero purchases so far (although it was only released a month or so ago and only has about 50 users). With "Pocket Rally" I didn't seem to mind paying the £1 to upgrade. I think the key difference between the two is that with Pocket Rally I didn't know I was behind, so when I found out I was I upgraded. With Calculate I let people know from the off how many solutions they have left - they are well aware of the situation and not really experiencing loss.
So the key is to introduce restrictions after some time limit and not warn them beforehand. That way they truly experience loss-aversion.
Not sure if this is evil or just marketing.
EDIT: changed lots of spelling and grammatical errors
Yes but what we're looking at here is: can we use cognitive bias to increase the number of people who pay for the full version.
So you give someone a demo for free. They know it's a demo and they know it's free. They will be cautious about buying a full version.
But if you give them a game for free, and then they find out whilst using it that it's only a demo, they will experience "loss aversion" and are more likely to upgrade since people experiencing loss aversion are more likely to gamble as they try to reconcile their loss.
Android has <15-min "refund" (actually I wonder if this is a "undo" where the payment didn't actually took place and goes through after the timeout, like gmail's "undo send mail", thus avoiding a chargeback)
Also, IAPs allows one to implement the demo/trial/shareware model. Most implementations are poor though, making you think you have the full game/app but subtly (or not so subtly) crippling it beyond usability, or compromising the experience with ads.