That might lead to greater profits if the growth in sales volume exceeds the reduction in profit margin. Or it might not. That relationship is called the price elasticity curve; every product has a different shape and optimization point. Learning the shape, and picking the optimization point, is a huge part of selling something.
But the key point is that it is the right of seller to place themselves on that curve. LogMeIn Ignition is $30 in the iOS App Store. Obviously they would sell more copies if it was 99 cents, but they've chosen their pricing strategy. Does the mere existence of greater demand make it ok for people to pirate that software instead? I don't think it does.
It's obviously true that there is not a 1:1 relationship between piracy and lost sales. But it's also not a 0:1...some pirated copies are in fact lost sales. And, what's lost in talking about this equivalence (or lack thereof) is the damage to the pricing strategy of the seller--even the copies they do sell will necessarily be lower on the price elasticity curve because piracy increases the volume.