Actually, it's quite a good analogy. No one benefits from this strategy in the final analysis because a race to the bottom makes all developers paupers. Smoking a cigarette relieves the pains of addiction (delivers short-term profit), kills you in the long term (destroys your business model), and imperils the health of the people around you (makes iOS and Android less desirable platforms).
That said, I disagree with the careless linking of FOSS principles and bad market practices. Linux, BSD, Apache: these technologies and others have had enormous positive impact that has enriched the industry as a whole more than paid versions could ever have benefited individual developers. However, the existence and promotion of FOSS in no way guarantees the cancer of one-dollar apps. Only developers' persistent undervaluation of their own work can do that. Specifically, their rush to capture the long tail of cheapskates at the cost of forgoing the bulk of the consumer surplus makes the entire market less desirable. Everybody loses when we must wade through a swamp of low-cost crap rather than the garden of costlier but higher-quality services we'd wish for.
Of course price competition is a legitimate strategy wherever it occurs. I'm simply arguing that it may not be the most effective in the short term or the long.
Econ 101 says that competition will push prices down to the level where everyone makes exactly enough to keep producing their product. Econ 101 assumes zero differentiation between products, zero brand value, etc., in these cases of perfect competition.
If you are a developer who's making something innovative and useful, whether on iOS or no, it is differentiated from the rest of the market. You are free to compete on price by selling for $1, but you may also compete on quality, solve a unique problem for your market, and sell for $5 or $10. I believe that many developers are doing exactly the latter, but still selling for $1 simply because they think it's "what is done." If they instead sold for $5 or $10, people would still buy and the developer would make more money. If enough people did this, it would remove the noxious attitude that "nothing is worth more than a couple bucks on the App Store." Consumers would get better apps, iOS developers would make a better living, and the ecosystem would improve as a whole.
They're killing their competition _and_ benefitting from it? Those poor fools!